Homeowners’ insurance and property insurance policies are meant to protect homes against most risks to the property including things like fire, theft and some weather damages. But, do you need hurricane insurance? If you are a homeowner or are soon to be a homeowner than you probably have heard about the different types of home insurance policies, but if not here is a quick summary of the three types:
- Replacement cost coverage: which pays the cost of replacing your property regardless of depreciation or appreciation. This means that the amount you will get to replace a completely destroyed home is fixed and will not decrease in value over time due to wear and tear on the property.
- Actual Cash Value: this type of coverage provides replacement cost minus depreciation. This means as the value of the home decreases over time, so too does the actual cash value of the home. This means that if a home is destroyed completely after some years, the homeowner might not get the full amount they paid for to rebuild, instead they will receive the amount that the home is currently worth less the calculated depreciation.
- Extended replacement cost: This coverage enhancement will pay for the replacement cost of the home including any increase in cost due to the increased cost for construction.
Everyone remembers the damage to the city of New Orleans in 2005 as a result of Hurricane Katrina. Thousands of people were left without a home, many were caught on camera, stranded on their rooftops as the whole area was flooded. According to a congressional study, Hurricane Katrina caused more than $43.6 billion worth of property damage stemming form 1.75 million claims and was one of the deadliest hurricanes in the nation’s history.
Whether experiencing that hurricane for yourself or seeing all of the coverage on the news, you can imagine the kind of wind, flood and rain damage that a hurricane can cause. So what are you supposed to do if you live in an area that has a high risk for hurricanes and you want to protect your home?
Unfortunately, the answer is not always simple. According to the The Christian Science Monitor, hurricane protection requires a multifaceted approach that is beyond your basic homeowners’ insurance policy. Even though a multitude of damages can be caused by a hurricane, its damage is probably not covered by homeowners’ insurance. Likewise National Flood Insurance faces challenging coverage questions based on the cause of the loss. (For instance, was the house destroyed by wind first, and then flooded?)
In that same article The Christian Science Monitor answered six key questions for its readers about hurricane insurance in anticipation for Hurricane Irene, a tropical storm that affected much of the east coast in 2011.
One of the issues addressed was about protecting yourself, your home and your possession from any potential hurricane damage was to review your homeowners’ insurance plan. Private homeowners insurance does not normally cover flood damage, but it might cover damage caused by hurricane strength winds. Unfortunately, whether or not a home was damaged by wind or storm will have to be determined and that could end up being decided by a court.
In some states homeowners’ insurance policies might have special deductibles for hurricane damage that are separate from the general deductible for other damages. These separate deductibles for hurricane insurance can often be set as a percent of the hurricane costs, usually around three percent, but can go as high as five percent of the damage costs.
Hurricane damage that is not caused by wind or rain might also be covered by a separate federally funded National Flood Insurance Program, which is available from a local insurance agent or directly through nationally advertised programs.
Standard homeowners’ insurance policies are not designed to protect homes from flood damage. To solve that The National Flood Insurance Program was formed in 1968 by the United States Congress as a means for property owners (and lenders) to financially protect themselves from the risk of flood damage. As long as the community in which a person lives participates in the National Flood Insurance Program, its residents are eligible to purchase a flood insurance policy.
What does flood insurance cover?
According to the Christian Science Monitor’s article, there are two types of insurance coverage available in a flood policy: insurance for buildings and for the personal property. Flood insurance for buildings cover any structural damage to the exterior and foundation and could cover any damage to certain items such as paneling, heating and cooling systems, carpet and built in appliances. Typically flood insurance can cover up to $250,000 for buildings.
Personal property insurance can cover a wide range of portable items including furniture, clothing, electronics and other personal property. A typical flood insurance policy can cover up to $100,000 in damages to personal property.
Both coverages are subject to restrictions including elevation of the home and whether or not the basement is above or below the established flood table.
If you are looking to protect your home from hurricane damage and are looking to purchase a flood insurance policy to protect yourself from any water damage the price is going to depend on where you live. For the purpose of this article, we will focus on the coastal areas that might face potential hurricane damage. Coastal regions are all considered “high-risk” and premiums will range from $580 per year for to up to $45,000 in both building and personal damages, all the way to nearly $6,000 per year for up to $350,000 in property damage protection.
Flood insurance is not full proof. It will not apply to some flood related losses you might incur as a result of a tropical storm, hurricane or flood. If a storm sweeps through and destroys some of your more valuable items like stock certificates, money, precious metals or jewelry the flood insurance policy will probably not pay for those items. Flood insurance may also not cover any damage to your yard or any structures on it such as decks, sheds, fences or swimming pools. A flood insurance policy is not designed to provide funds to help pay for temporary housing in the event of a home destruction.
Other resources for hurricane protection
In extreme cases like Hurricane Katrina, the Federal Emergency Management Agency can step in and offer disaster assistance for those in need. This can range from providing food in shelter for those who lost their homes and much more. If the president declares a disaster in your area then you may qualify for assistance from the Federal government. However, most of the disaster assistance from the government will be in the form of federally subsidized loans from the small business administration. It is much safer and more reliable to purchase a flood insurance plan to protect your home in the event of a hurricane. You will have to pay premiums up front, but in the event of a disaster you will not be left with government loans to repay.
Immediate flood protection is not available
If you are panicked because you turned on the news to see a hurricane headed right towards your home it is probably too late to purchase a flood insurance policy to protect your home. It is important to play it safe and protect yourself well before an emergency scenario occurs because there is often a 30-day waiting period for flood insurance policies to go into effect. If you live in a high-risk area it is the best bet to protect your home with a flood insurance policy that will protect you in the case of a hurricane. Your local independent insurance agent will be able to better discuss your risk for hurricane damage and will be able to let you know if your community participates in the National Flood Insurance Program.
Ways to protect your home and lower your insurance costs
There are many precautions that you likely will want to use if you live in a high-risk area for hurricanes. You can install storm shutters to protect your windows, you can have a wind resistant roof to protect your home from hurricane strength winds or you can brace your garage door with braces. These are just a few things that House Logic outlines to protect a home as well as lower your hurricane insurance rates.
When available, hurricane insurance and can be combined with a homeowners’ insurance policy that can reimburse you from wind and rain damage. If you live on a coast you are going to have an increased risk of flood damage resulting from a strong hurricane.
A homeowner insurance policy is only one part of the insurance puzzle. To make sure you are protected from potential Hurricane related losses, contact your local independent insurance agent. The agent will be able to help you identify what your existing policy covers and help you find any additional coverage you may need.
Other Enhanced Insurance articles related to Natural Disaster Insurance:
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