Don’t Wait For the Next Superstorm to Do An Insurance Check-up
By: Advocate Brokerage
By Roz Binday
Superstorm Sandy was a lesson to all of us that we need to pay closer attention to our insurance coverage. No one expected a storm of that magnitude. But it could happen again. The national Oceanic and Atmospheric Administration (NOAA) predicts that there will be an active Atlantic hurricane season. The busiest storm season is less than a month away.
The Insurance Information Institute advises policy holders to sit down with their insurance brokers to make sure that they have coverage that will offer the maximum protection for their property in the event of another superstorm. Obtaining some insurance, like a Federal Flood policy, has a 30-day waiting period from the date you apply, so it is essential to schedule this insurance review immediately. When you know a storm is coming, it is too late to add this important coverage to your personal insurance portfolio.
The Institute offers the following tips for the hurricane season:
- Carry enough insurance so that you can replace/rebuild your home completely. Keep in mind that the dwelling limit you carry is NOT based on market value. Make sure your policy has extended dwelling replacement or guaranteed replacement cost with a reasonable cap; or better still with no cap. Don’t stint, make sure it is based on a realistic replacement cost. What you want is the assurance that if your home is partially or completely destroyed during a storm that you will be able to re-build at a time when the prices charged by building contractors may increase along with the cost of materials.
- Take inventory of all your possessions by photographing them. If possible, keep all receipts for major purchases. An up-to-date home inventory will help you determine how much insurance your need. Remember to take all this information with you if you have to evacuate because of storm.
- Your insurance broker can offer you two policy forms for the contents of your home. The lesser one covers on a Named Perils basis, which specifically lists about sixteen items by name that are covered (i.e. fire, lightning, windstorm, hail). If your loss is not named, it is not covered. The better form is the All Risk form. It lists a handful of exclusions (i.e. war, vermin and inherent vice, flood, earthquake, wear and tear). If it is not excluded, it is covered. We advise our clients to deal with carriers that offer the All Risk form for BOTH the contents and the dwelling.
- What happens if you can’t return to your home because it is badly damaged due to a covered peril? While relying on family and friends is an option for some, a standard coverage is Loss of Use…also called Additional Living Expenses. This will cover hotel and restaurant bills; or if the damage is significant, you might have to rent another home. If you have a policy for a home-rented-to-others, you will be covered for the loss of rental income.
- Get flood insurance…even if you are in an area that is not prone to flood. Many victims of Superstorm Sandy discovered too late that their homeowner’s insurance didn’t include flood damage. People living in low-lying coastal areas are usually required to have flood insurance if they have a mortgage and many of them purchase it through FEMA. Talk to your insurance professional about private flood insurance.
- Understand what your deductibles are for each policy. Ideally, you want to pay as little as possible out of pocket. Does your policy have a punishing separate hurricane deductible? That deductible kicks in when the National Weather Service officially declares a storm to be a hurricane. If the insured value of your home is $200,000 for example, a 2% hurricane deductible means that you would have to pay the first $4,000 needed to repair your home. But remember, your claims history is public information. Do not use your policy for maintenance matters. Carriers look at frequency and severity. Processing lots of losses may get you cancelled.
- Individuals who rent need insurance as much as homeowners. Rental insurance will cover your personal belongings as well as your living expenses if your home is destroyed by a hurricane or another insured disaster. It also provides comprehensive personal liability, which everyone should carry to protect their assets.
- Have an evacuation plan in place and make sure that all family members have a copy. Take all of your insurance information with you. Research in advance what shelters or motels will take pets. If you can’t find a place that accepts pets, contact your local animal shelter. Never leave your pet behind during a mandatory evacuation.
- Protect your property in advance of extreme weather. Make sure that all the trees on your property are trimmed and cut down branches over your home. Secure the shingles on your roof and seal any cracks or holes around the windows.
Many people are still recovering from Superstorm Sandy. The best protection you have against extreme weather is up-to-date insurance coverage. Now is the time to sit down with your insurance broker to review your coverage to make sure that you can ride out a storm.