Covered for a natural disaster, or not?

Time for an insurance review.

I’m putting together my to-do list for the holiday vacation. After all this year’s natural disasters, first on the list is an insurance review. I started the review, and more and more questions kept coming up! Naturally, this led to an Advisory!

Ask your insurance agent these 7 questions to see how well YOU are covered for a natural disaster.

“How many of your clients are under-insured? Am I one?”

This is a tricky question, of course! Maybe you could soften it starting with this quote from Nationwide:
“I understand that 60% of American homes are under-insured by an average of at least 20%. I want to be sure I’m not one of them!”

“I’m worried about all the recent (fill in the blank: wildfires, storms, tornadoes). Am I covered for a natural disaster? What if my house is totally destroyed?”

This is the main question you want answers to. Start with these sub-questions . . .

• What is the amount of my home coverage?
• Is that based on the value of the house, or replacement cost? (Be careful. “Value” of a home could include the value of the land, in which case your coverage might not be enough to replace the house.)
• Exactly how is replacement cost figured in my policy? (It turns out that there is “replacement cost” and then there’s “extended replacement cost.” Make sure your agent can explain which you have, and the difference between them.)

“If I have to live somewhere else while the house is being rebuilt, will my policy cover additional living expenses?”

How much and for how long? Any restrictions on where I stay? How do I get the money in my hand?

“Will my policy cover (fill in the blank: floods or storm surge from a hurricane, earthquake, land slide following rain, volcanoes)?”

You will probably NOT BE COVERED for a natural disaster from the list above!

I love this paragraph from esurance

Homeowners insurance typically doesn’t cover landslides or mudslides. That’s because both are considered a form of “earth movement”, and like an earthquake or sinkhole, they’re generally excluded from a standard homeowners insurance policy. Flood policies often don’t cover damage from landslides or mudslides, either. And earthquake policies only offer reimbursement if an earthquake caused the events.

Quiz your agent closely on coverage for natural disasters. Be sure you know just where “water damage” (covered) leaves off and “flood water damage” (not covered) starts, where “rain damage” (covered) ends and “mud damage” (not covered) starts – on YOUR policy!

Perhaps you need separate policies to be sure you are covered for natural disasters?  We have addressed some of these special threats, including insurance policy info, in earlier Advisories about Volcanoes, Earthquakes , and Floods.

“What else don’t I know about? What about . . .”

• Mold
• Sewage backups
• Debris removal after a disaster
• Lightning
• Hail
• ????

Get your agent to mention some of the frequent problems he or she has encountered here in your neighborhood. Some of these may be covered by your policy, others not. You may want to add an endorsement to your policy to cover a specific risk.

“This is adding up. What can I do to reduce premiums?”

The first thing to discuss are your deductibles, particularly if there has been a change – from dollar amounts to percentages, for example. A 5% deductible may sound better than a $15,000 deductible, but not if your house is worth $400,000!

Generally, the higher the deductible, the lower the premium. You want the highest deductible you can afford.

And you may want to check with your agent to see if you can make changes or improvements to your home that will improve your coverage for natural disasters while lowering the insurance company’s risk. These might include replacing the roof, upgrading the electric system, clearing brush around the house, retrofitting for earthquake, or installing storm shutters. Ask for a list of all the home discounts you’re eligible for, not just those associated with natural disasters!

Now, I don’t review my insurance every year – but this year I’m going to with the help of these questions. I hope you use them, too!

Virginia
Your Emergency Plan Guide team

P.S.  If you discover that you seem to be well covered for natural disasters (Hooray!), you still might want to pose this last question:

“Is the bill for my current homeowner’s policy going up?”

If the answer is YES, and it’s more than 5% or so, ask why. You might hear these reasons:

• Recent disasters have made prices rise for all insurance companies.
• Risks have gone up in your neighborhood.
• Your personal risk profile has changed. (Confirm what’s changed – is it your credit score? That could have an impact in some states.)

P.P.S. Consumers Reports says that people who shop for better deals on property insurance can save hundreds of dollars a year. You can get quotes for free through insure.com or InsWeb.com. (as recommended  by This Old House)

And finally, a disclaimer. I am not a licensed insurance agent, hence all the links in this Advisory to what I trust are reputable sources. Be sure to get advice on insurance from professionals.