What happens to timeshare owners when their resort is destroyed by a hurricane like Dorian?
First of all, the team at RedWeek extends our condolences to all timeshare families impacted by Hurricane Dorian. We want to use this Ask RedWeek forum to inform consumers about what to expect in the face of future natural disasters. We also called numerous timeshare resorts this week in the Bahamas' Abaco Islands but, understandably, got no responses.
Chad Dorsey, vice president of the Brown & Brown of Florida insurance company, was kind enough to provide our members with an insider's perspective of Hurricane Dorian. It was a very personal event for him, since he is a native Floridian who grew up 60 miles from the Bahamas and the Abaco Islands, site of the worst destruction from Dorian. His insurance company also represents 60 resort and timeshare properties across the US, including several that were directly in the line of fire from Dorian. Finally, and to reinforce the reality of his story, we should advise you that Chad and his family were forced to evacuate their West Palm Beach home on Friday, August 30. They were not able to return until Wednesday, Sept. 4. During that same period, most of Florida's coastal timeshare properties were shut down under mandatory evacuation orders.
Based upon his company's work with resorts damaged by previous hurricanes, Dorsey gave us a sobering view of what to expect when Dorian's winds and waters finally subside, as well as some thoughts about how timeshare owners & travelers can plan ahead for natural disasters.
What to Expect After Dorian
Down the road, many months after Dorian's storms have cleared, timeshare owners at impacted resorts can expect the following:
- Resorts in the Abaco Islands may never get rebuilt — or get government permission for a rebuild. At severely damaged resorts, the homeowner association boards may choose, instead, to terminate the timeshare and sell the property assets.
- The resort's insurance may not cover all damages from the storm. Most policies come with deductibles and co-pays that resorts must pay from reserve funds. Unfortunately, many resorts don't keep enough money in reserve to even cover the deductible portion of a major insurable event. A real-life example, according to Dorsey: an HOA that insures a $10 million building might have to come up with $500,000 to pay its deductible BEFORE the insurance money kicks in for reconstruction. Dorsey knows of several resorts that don't have enough cash in the bank to cover deductibles for wholesale emergencies.
- HOAs that don't have adequate reserves will typically impose a one-year or multi-year special assessment on owners to cover needed repairs. These assessments, which can range from hundreds to many thousands of dollars, per interval, land on top of existing maintenance fees.
- An unknown but predictable percentage of owners abandon their timeshares after an earthshaking event. Why? Because if they can't use their timeshare, why keep paying for it? Special assessments also drive frustrated owners to the exits.
- Making financial matters even worse, insurance premiums at damaged resorts will increase. After the last major hurricane events in Florida, premiums rose 7 to 10 percent, on average. Also, due to all the hurricanes along the East Coast in recent years, many insurance companies limited some of their policy coverages to reduce claims from injured customers. This practice means that HOAs will have to pay more out of pocket costs to install hurricane-strength windows, reinforce roofs, and do other code compliance requirements that didn't exist when the original oceanfront resort was built in the 1960s.
- Don't expect a quick return to normalcy at any heavily damaged resort — or at any Florida resort that had to evacuate on the brink of Dorian's arrival. Not only were guests evacuated, but all staff and management, as well, from many Florida timeshares. "The impact isn't just the weather, but waiting for service staff and management to come back," Dorsey said.
- HOA boards that have neglected or deferred major maintenance projects need to act now to prepare for future hurricanes. Unfortunately, they're already too late for this year. Peak hurricane season is this month, September, but it runs through November. The time to budget and prepare a ten-year reserve plan is right now, Dorsey says, while the sense of urgency and emergency is high.
- Repair and reconstruction takes time, too. In the property casualty insurance industry, companies are just now wrapping up all claims from the 2018 hurricanes, Florence and Michael. Two years, Dorsey says, is a reasonable time frame to evaluate disaster-to-recovery. Here's an insurance industry snapshot of hurricanes in Florida and surrounding areas. The largest ever (up until then), was Hurricane Andrew, which hit Miami in 1992 and created $27 billion in insurable losses. In recent years, and with increasing ferocity, came Hurricane Matthew, 2016, which had $6 billion in losses. In 2017, hurricanes Irma, Harvey and Maria cost a combined $200 billion in insurable losses. Insurable losses, FYI, are only a fraction of the overall economic losses created by hurricanes and other natural disasters.
Disaster-Planning for Savvy Travelers
Tip #1: Savvy travelers should invest in travel insurance that covers catastrophic events. Many timeshare companies offer these plans at the time of reservation. Third party firms also offer various forms of coverage, including CSA Generali, RedWeek's trusted partner. Travel insurance costs a small percentage of your travel expenses - less than $200 on the average booking - which is a small price to pay to insure an expensive vacation - especially if you know you are traveling to a region during potentially risky dates. However, according to Dorsey, only a small percentage of travelers buy trip insurance.
Tip #2: Timeshare owners should contact their resort, long before their trip, to find out if the resort has a contingency plan to deal with onsite disasters that threaten the safety of guests. Owners should also inquire if the resort has a backup contingency plan to replace vacations wiped out by Mother Nature. In other words, find out upfront if your timeshare HOA or developer will reimburse you for a lost week with a substitute vacation stay. Best to know the cancellation-and-refund rules before you travel.
