Vacationing in Ocean City in 2013? Look for 2 New Insurance Options

For many Ocean City real estate agents, the real storm started when Hurricane Irene fizzled.

Tens of thousands of renters had their summer vacations interrupted in August 2011 when emergency management officials ordered an evacuation of the island as what was then a massive Category 3 hurricane bore down on the coast of southern New Jersey.

Even though the storm made landfall only 20 miles away, Irene spared Ocean City the worst of her fury. The storm hit on a favorable tide and never brought hurricane-force winds. But for the island real estate industry, the winds had just started to blow.

Families had signed contracts typically worth thousands of dollars for summer home rentals, and with their vacations cut short, they expected at least partial refunds.

With the storm arriving on a Saturday evening and passing through on the following Sunday morning, two sets of Saturday-to-Saturday rental cycles were interrupted. The mandatory evacuation order came on a Thursday evening, and rental offices could not begin to accept new tenants until the following Monday. 

Some owners refunded their tenants. Some rental contracts included clauses that referenced natural disasters. Many owners did not issue refunds — and that left a lot of renters in limbo with real estate offices in the middle of year's worth of disputes.

"We were not prepared," said Gary Jessel, broker and president of Fox Real Estate, of the local real estate industry.

Jessel was part of a local group that explored options to address the confusion uncovered by Irene.

Vacation renters in 2013 will likely see two products of their research:

• Travel Insurance: New contracts will clearly spell out a tenant's responsibility to secure or waive a travel insurance policy. Tenants would be responsible for buying travel insurance for trip cancellations, interruptions or delays for natural disasters, medical emergencies and other reasons. Real estate offices will refer tenants to companies such as CSA Travel Protection, where premiums vary depending on a number of factors, including length of vacation and cost of rental.
• Accidental Damage Insurance: Unrelated to the hurricane, accidental damage insurance would replace the traditional security deposits required by most real estate offices. The insurance would cover anything from spills on carpets to damaged screen doors.

As with the vacations interrupted by Hurricane Irene, accidental damages have often put real estate offices in the middle of disputes between owners and tenants.

Tenants have been required to provide security deposits that range from $250 to $500 for their week's vacation.

But when damage occurs, tenants often make an effort to hide it — moving a chair over a carpet stain or concealing damage to an appliance. With the quick Saturday turnover from one tenant to the next, damage is not always discovered immediately. That leaves owners at a loss to know which tenants caused what damage.

"It creates an antagonistic situation," Jessel said.

Real estate offices hold security deposits until tenants and owners can agree.

The new policy would have tenants purchase a nonrefundable $50 accidental damage policy instead of placing a much larger security deposit.

"The net effect is that tenants will call right away to report damage (knowing that they're insured)," Jessel said. "And the agent will get out of the middle of disputes between owners and tenants."

Jim Waggoner, a vice president of Long & Foster Real Estate's Resort Rental Division, said his company replaced its "move-out deposits" (security deposits) with accidental damage insurance for vacation properties on the Maryland and Delaware coasts for several years ago.

"It's worked extremely well," Waggoner said. "Vacationers like it better even though it's non-refundable. I think they would rather go home happy than go home wondering if they're going to be hassled about a screen door."

As in New Jersey, Delmarva real estate agencies had trouble pinpointing damage with eight to 10 families typically occupying the same property over the course of a summer, Waggoner said.

But under the new accidental damage policies, tenants are not reluctant to report damage, he said, listing a sampling from the summer: broken glass in a microwave door, a curling iron hole in a comforter, bifold door repair, sofa repair and screen door repairs.

For Manny Avino, a Churchville, Pa., resident who owns four rental properties in Ocean City, the news that most major real estate agencies in Ocean City will adopt the new accidental insurance program came as a surprise.

He said he worries that owners will be forced to file claims to try to get reimbursed.

"The only thing I'm asking is for them to give us the choice," Avino said.

Jessel said the real estate company will be able to file the claim to relieve tenants of the responsibility. The property owner would not be responsible for filing claims on a tenant's policy.