ASK KIM Brace Your Policy for the Next Hurricane by Kimberly Lankford
All of the news reports about Hurricane Isabel have me thinking about insurance. Would hurricane damage be covered by my homeowners policy, or would I need flood insurance too?
It depends on the type of damage you think you might sustain in a big storm. Your homeowners insurance policy will cover damages from wind and rain, but it won't cover flooding.
Much of the damage from Isabel occurred inland and was caused by high winds and falling trees. So, for example, if a tree falls through your roof and the rain leaks through two floors and floods your basement, your homeowners policy would likely protect you. However, if you live near a river and the storm causes it to swell past its banks -- which is what happened along the Chesapeake Bay and Potomac River -- then your homeowners policy will not protect you. For that kind of coverage, you'll need a separate flood policy from the Federal Emergency Management Agency.
You can generally buy federal flood insurance from your insurance agent. The costs are based on your proximity to a flood plain, your house's elevation, and whether you have a basement. The price can range from about $350 to almost $3,000 per year for $100,000 of coverage, depending on the risk. For more information and price listings, see FEMA's National Flood Insurance Program page.
Don't wait until you hear about an impending storm to buy the coverage, though. There is a 30-day waiting period before the flood insurance policy can become effective.
Also be prepared for the hurricane's effect on your policy after the storm clouds clear. For example, you may have to pay a higher windstorm deductible. These deductibles, which tend to be common in high-risk areas, are sometimes dollar amounts ($5,000, for example, even though your deductible for all other damages may be $500 or so) or a percentage of your coverage (sometimes from 1% to 15% of your house's replacement value before the windstorm coverage kicks in). Some high-risk areas, like parts of coastal Florida, require separate windstorm policies in addition to your homeowners insurance.
But even if you aren't subject to a high deductible, you may want to think twice before submitting a claim -- especially if the damage totals less than $1,000.
Homeowners insurance companies have been losing a lot of money recently and are dropping many policyholders after submitting just one or two small claims. And because insurance companies share claims information, it may be tough for you to get another policy for a decent price.
With that in mind, it's wise to raise your regular homeowners insurance deductible to at least $1,000. If you aren't going to be submitting small claims, at least you can lower your premiums -- often by up to 30% -- by raising your deductible from $250 to $1,000.
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