NEW YORK (MainStreet) — With Hurricane Joaquin set to rock the East Coast of the U.S. over the next few days, consumers are assessing their preparedness for potential damage. In terms of insurance, are you ready to prevent a natural disaster from becoming a personal finance nightmare?
Many coastal areas are still prone to flooding from storms, tornadoes and hurricanes even though the National Oceanic and Atmospheric Administration predicted the 2015 Atlantic hurricane season, which runs from June 1 to November 30, will be below normal. This summer the NOAA predicted a 70% chance of 6 to 11 named storms with winds of 39 mph or higher, including three that become hurricanes.
“A below-normal season doesn’t mean we’re off the hook,” said NOAA Administrator Kathryn Sullivan. “As we’ve seen before, below-normal seasons can still produce catastrophic impacts to communities.”
Flood Insurance Details
As hurricane season begins, consumers should start by checking their current homeowner’s insurance coverage. More often than not, homeowner's insurance won't suffice in the event of flooding; such policies won't cover damage resulting from the rising water a hurricane sends your way. In such situations, claims adjusters assessing the damage from an event like Hurricane Joaquin will blame the flooding and refuse to cover the cost of repairs.
If you're hoping to hop on the supplementary insurance bandwagon last minute, though, you're probably out of luck: it's best to avoid waiting until the last minute to buy flood or wind insurance, because some companies make a purchase effective only after 30 days. If you live in a high-risk area and have a flood insurance policy, you should learn what your true premium rate is, without subsidies.
Of course, as MainStreet has reported, the National Flood Insurance Program is some $24 billion in the hole. Many homeowners in flood zones are beginning to feel that fiscal pain as flood insurance premiums skyrocket. Rate increases of 18% to 25% for some policyholders have gone into effect as of April 1, with additional surcharges up to $250.
That's in part because of climate change and decades of premiums lagging risk, according to Nicholas Pinter, professor of geology at Southern Illinois University. But the "government handout" of flood insurance subsidies will have to end, he told MainStreet - with homeowners absorbing a "doubling or tripling, or in some cases much more," increase in premiums. That, or else floodplain residents should consider moving to higher ground.
George Kasimos, a real estate agent in Toms River, N.J., is intimately familiar with flood insurance. His home was damaged by Superstorm Sandy, but his claim was paid, and he rebuilt. Kasimos says the $24 billion flood insurance shortfall is due to the bureaucracy and "mismanagement" of the Federal Emergency Management Agency.
"Only 44% of our premiums actually go toward paying of our claims," he says. Kasimos contends that out-of-control expenses - and litigation defense - are contributing to the insurance program debt.
If you do have insurance, homeowners should take photos of their home and valuable items and download the pictures to a website so they can retrieve it remotely in the aftermath of a storm for an insurance claim.
Don't Forget Your Car
Consumers also need to prepare by checking their auto insurance coverage.
Drivers have two options when they purchase auto insurance to protect their vehicles. Collision only provides coverage for when a driver collides with another object or vehicle.
Comprehensive insurance, which is cheaper and often purchased by people with older cars, provides coverage for risks such as fire, theft, falling objects, hail, wind, vandalism, striking an animal and floods, said Bill Crowley, worldwide automobile claim manager for Chubb Insurance in Warren, N.J.
The most common weather-related claims are for hail, falling tree limbs and water damage. To avoid gaps in your coverage, drivers should aim to purchase both collision and comprehensive coverage, he said.
One frequent occurrence is a claim for water damage after the car has been driven into water that is "deep enough to severely damage the vehicle," Crowley said. Although Chubb considers these losses under the "comprehensive" coverage, other insurance companies will consider these situations as falling under "collision" and see the water as an object, he said.
For drivers who leave their cars in parking lots or on the street because of high water and experience damage to their vehicle, the case is usually considered a flood loss and becomes a comprehensive claim.
"Vehicle owners who do not have collision coverage on their vehicles may want to check with their insurer or to see what position they take on situations when the vehicle has been driven into deep water," Crowley said.
The amount of damage from a flood can be extensive and may not be limited to just the engine and electrical systems where you can view the extent of the loss, said Laura Adams, insuranceQuotes.com's senior analyst.
Tasks Prior to a Storm...
Beyond insurance. prepping your home is also essential: developing a current inventory of your possessions with their make and model numbers can speed up a claim and verify losses for your income tax return, said Jim Gustin, a senior property specialist at The Travelers Companies, the Hartford, Conn. insurance company.
Stocking up on food, bottled water and other essential items such as prescription drugs for a week is important, said Peter Duncanson, director of disaster restoration training for ServiceMaster Restore, a Memphis, Tenn.-based residential disaster restoration company. Create an emergency container filled with cash, a first aid kit, batteries and blankets. Make sure you add spare phone chargers and fill up your vehicle’s gas tank.
“Estimate that each family member will need a gallon of water every three days and have a ready supply of nonperishable foods,” he said.
Ensure Your Data Is Not Vulnerable...