Storms Bring Insurance Worries for Coastal Residents
Researchers predicting a total of 15 to 18 tropical storms and hurricanes forming the Atlantic basin in 2016.
Hurricane season is in full swing and the East coast could take a beating this year with North Carolina researchers predicting a total of 15 to 18 tropical storms and hurricanes forming the Atlantic basin in 2016. This is a statistically significant change from the 11 named storms that have been the average from 1950 to 2014.
The researchers are also predicting that 8 to 11 of these named storms could grow into hurricanes with three to five of them becoming major hurricanes. In other words, you had better batten down the hatches.
Luckily, many states managed to avoid the brunt of Hurricane Hermine, with insurance firms estimating the damage at $500 million. While this sounds like a lot, it pales in comparison to the $50 billion in damages that Hurricane Sandy produced.
Homeowners on the East coast have recently gotten some good news in regards to rate increases with states like Connecticut seeing a drop in the rate of increase for homeowners insurance. While not exactly a decrease, in 2015, the state of Connecticut saw carriers requesting increases of only 4.6 percent instead of the more typical 6.8 percent increase.
Deductibles Can Increase During a Storm
Despite the slowing down of rate increases, homeowners in coastal cities still have storm anxiety, thanks to hurricane deductibles that can dramatically increase their out of pocket costs.
Many states along the Eastern seaboard have hurricane deductibles in place. These become popular after Hurricane Andrew struck in 1992 as a way for insurers to help mitigate the risk of damages in hurricane prone areas. As more and more people moved close to the shore, insurers were forced to add hurricane or named storm deductibles to help keep coverage affordable.
Basically a hurricane deductible ups the policy deducible once a storm meets certain requirements. The deductible is the amount of the loss that must be paid by the policyholder before insurer coverage comes into play. In most cases, your deductible is a set amount such as $500 or $1,000.
When a hurricane or named storm is responsible for the damage, the policy deductible changes to a percentage of the damage, which can range from 1 percent, all the way up to 10 percent. In some states, it stays a fixed dollar amount but that amount increases dramatically for hurricane damage.
The deductible increase will vary by state, as an example, Connecticut allows for a maximum hurricane deductible of 5 percent while North Carolina allows deductibles between 1 and 5 percent. In Florida, the deductible can range up to 10 percent.
These deductibles can make a huge difference in out of pocket costs. If your home is destroyed and you file a $250,000 claim, you could be forking up $12,500 on a 5 percent hurricane deductible instead of your standard $1,000.
The trigger for hurricane deductibles will vary by state. As an example, in Connecticut, the trigger is when the National Weather Service records sustained surface winds of at least 74 miles per hour, anywhere in the state.
While homeowners may not feel a hurricane deductible is fair, state lawmakers have to balance the disappointment of homeowners with the risk that insurance companies will pull out of their state altogether if hurricane losses get too high.
In 2006, Allstate stopped writing homeowner policies in Connecticut to avoid excessive risk after hurricanes Katrina and Rita hit.
Flood Insurance Can Also Be a Worry
In addition to hurricane deductible worries, many coastal dwellers have to deal with flood insurance worries as well. Changing weather patterns and more severe storms have led to changes in flood maps, forcing some homeowners who have never needed flood insurance before, to suddenly need this coverage type.
Unfortunately, the cost of flood insurance can be a bit of a shock. Homeowners may need a elevation certificate before getting flood insurance and even then, the cost of flood insurance can range up to $4,000 for homes that are only a quarter mile from the nearest water. As you get closer to the waters edge, the cost of flood insurance can go up dramatically.
However, choosing to ignore the need for flood insurance because you can’t afford it can be an even more expensive mistake, especially if you have a mortgage on your home. Until you make that final payment, the bank owns your home and will want it (actually they require it, read your policy) properly protected by insurance. If you fail to put a flood insurance policy in place, the bank will do it for you via a forced placed policy. These policies can be more expensive than a policy you can buy on your own.
If flood insurance is required in your area, or by your lender, you should immediately put a policy in place to avoid forced placed coverage.
Tips for Dealing with a Hurricane or Flood Policy Claim
Here are a few tips that will help make your flood or hurricane claim go more smoothly:
- Review your policy to verify your damage is covered as well as what your deductible will be for the particular type of damage you experienced.
- Take photos and video as soon as it is safe to return to your home. This will help document the damage for your claims adjuster and prevent any misunderstandings about the extent of the damage.
- Secure your home as soon as it is safe and do what you can to prevent further damage. Board up windows and put a tarp over any holes in the roof. Insurers may have the right to refuse any damage that is caused after the storm because you failed to secure the home.
- Keep notes on every conversation you have with your insurer. Take down, names, titles and the details of the conversation. This can be very helpful if there are any disputes later in the process.
- Keep all receipts for dinners, hotels and other expenses if you cannot live at your house due to the damage. Loss of use is component of most homeowner policies and will reimburse you for these expenses.
- Remember, settlements are negotiable. The insurance company will try to pay the least amount possible so if you are unhappy with their offer, make a counter offer but make sure you back it up with details.
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