The 2020 hurricane season could spell financial disaster for homeowners living in coastal states. Named storms are coming in at an unprecedented pace. There are 25 storms expected to hit the Atlantic this season, twice the average. Hurricane Laura, which battered the Louisiana coast in August, could be responsible for up to $12 billion in insured losses.
Even if you think you’re prepared, you may discover that your homeowners insurance doesn’t fully cover damage from a hurricane. These four costly pitfalls can make it difficult to stay protected.
Flood insurance: Avoiding the floods
According to Mark Friedlander, spokesperson at the Insurance Information Institute, flood insurance is an optional product and only 15% households in America purchase it.
According to a U.S. Congressional Budget Office report, flooding is more common than high winds when a hurricane hits. This means that homeowners aren’t covered for severe storms, even if they have hurricane or wind coverage.
Patty Templeton Jones, president of Wright Flood, a Florida-based insurance company, says that “the biggest mistake people make is believing it won’t happen”
Nearly everyone is affected by flooding. According to the Federal Emergency Management Agency, floods have affected nearly all U.S. states since 1996. Even a small amount of floodwater can cause severe damage; FEMA estimates that an inch can cause up to $25,000 in damages.
Flood insurance typically comes from the National Flood Insurance Program via one of its authorized providers, and coverage is sold separately for the structure and contents of the home.
Not securing coverage on time
It may not be possible to add hurricane coverage to your homeowner’s policy if a hurricane is approaching.
Friedlander warns, “Don’t wait for the storm to come.” “Most insurance companies will place a moratorium once a weather service storm warning or watch is issued. This means that you cannot make any changes to the policy.”
You’ll typically need to buy flood insurance at least 30 days in advance. If you buy a policy to protect against wind damage, some states may require you to wait. While most homeowners policies cover windstorm damage but not all owners have to be mortgaged, they can opt out.
Insurers will allow you to add windstorm coverage if there isn’t an active hurricane watch.
Choose a deductible that you cannot afford
Many homeowners don’t pay a flat dollar amount per hurricane insurance claim as they would for a fire or theft. They pay a percentage from their home’s insured worth before the insurer kicks into action. This amount can vary from 1% to 10 percent.
If your home is $300,000.00 and you choose a hurricane deductible of 5%, you could be responsible up to $15,000 before insurance companies start paying.
A large deductible usually means a lower premium. This could lead you to believe that you can accept a higher percentage and never have to file a claim. Lynne McChristian, Director of the Office of Risk Management and Insurance Research at University of Illinois Urbana-Champaign, said that this can lead to a costly mistake.
She says that people should not take a higher than they can afford. “The difference between the premiums you pay and what you get at claim time is negligible.”
Avoid a potential financial disaster by being aware of your hurricane deductible as well as the insured value for your home.
Insufficient coverage
Insurance is designed to protect you from financial loss in the event of a natural disaster. If you don’t take precautions, you might find yourself in a financial bind as the costs of a hurricane can mount up.
Jessica Hanna, spokesperson of the American Property Casualty Insurance Association, says that underinsurance is a major problem. “This only seems to be revealed after a major storm.”
To meet high construction costs and the increased demand for contractors following a hurricane, you may need to increase your coverage. You should also consider whether your coverage is sufficient to cover the cost of moving and replacing personal items.
Hanna suggests that you inform your insurance company about any recent home improvements, and keep a record of all the contents in your home.
She says, “This is a great time to check your insurance with your insurer.” Smartphones are now so simple to use — you can take photos, videos and store them in the cloud.
