Downed powerlines will be seen on Highway 90 after Hurricane Laura passed through Iowa, Louisiana, on August 27, 2020.
Elijah Nouvelage | Reuters
If communities along the Gulf Coast assess the damage left in the wake of the hurricane, homeowners elsewhere can check their own insurance coverage.
The massive storm struck early Thursday in Louisiana near the Texas border as a Category 4 hurricane, hitting sustained winds of about 150 mph and causing a dangerous storm surge. While Laura is weaker as it continues north, it’s a good reminder that hurricane season is far from over.
The season runs from June 1 to November 30, although the peak is mid-August to late October. And while many hazards are covered under the standard part of your homeowners policy, some weather-related events qualify differently for coverage – and some may not be addressed at all.
“Having homeowners insurance is great, but the important thing is to understand what it does for you,” said Fabio Faschi, an expert on such insurance for online brand Policygenius.
How hurricanes are covered
If you live in a state along the East Coast or Gulf of Mexico, there is a good chance that your homeowners policy has a hurricane-specific risk. Likewise, in states you are more likely to be sensitive to wind-related events – ie tornadoes – you are likely to have a wind / hail pull off. You could have both.
Typically, these amounts vary from about 1% to 5% (with a minimum of $ 500) depending on the specifics of your insurance contract. Some homeowners may opt for an even higher deductible when available. In general, the higher the deductible, the lower the premiums, and vice versa.
It is important to note that for that percentage amount, the amount is based on your insured value, not the damage caused.
Five most expensive U.S. hurricanes on record
| Storm | Year | Category | Custom cost |
|---|---|---|---|
| Katrina | 2005 | 3 | $ 170.0B |
| Harvey | 2017 | 4 | $ 131.3B |
| Maria | 2017 | 4 | $ 94.5B |
| Sandy | 2012 | 1 | $ 74.1B |
| Irma | 2017 | 4 | $ 52.5B |
So if your home is insured for $ 200,000 and you have a 2% hurricane amount, you would be responsible for covering the first $ 4,000, regardless of the total cost of the damage. At a 5% deductible, that amount would be $ 10,000.
This means that it is wise to have a plan to cover your share in the aftermath of a disaster.
It is also important to make sure that the amount of insurance you have on your home is based on the replacement cost, not the market value, Faschi said.
“You can buy a property for $ 1 million, but it can not cost $ 1 million to replace,” he said.
The opposite can also happen: The replacement cost may be more than the market value.
Flood cover
Homeowner policies generally exclude flooding from coverage – something more than half (53%) of homeowners do not know, according to a Policygenius survey.
However, just 1 inch of water in your home can cause up to $ 25,000 in damage, according to the Federal Emergency Management Agency. And one in four flood insurance policies comes from outside a high risk zone.
For coverage in most situations, you would need separate flood insurance through the Federal National Flood Insurance Program as a private insurer.
However, keep in mind that there are exclusions and restrictions for coverage. And, flood policy takes 30 days to become effective. The average annual cost is $ 700, although this can vary widely.
“If you’re in an area that doesn’t see a lot of flood activity, it’s costing you less,” Faschi said. “But if you live right on the coast, it will cost you more.”
You can check your flood risk on realtor.com, which has started recording this information along with other property details.
Odds and ends
Before a storm hits, it is worth taking pictures as a way to document the condition of your home and your belongings.
“That can go a long way toward documenting your claim,” Faschi said. “It takes a lot of guesswork out of adjusting the claims.”
The idea is to have proof of what you have, along with a record of what kind of shape everything was before the storm. If you can not prove the previous condition of, say, your now missing side door, it could cause sniffing or denials in the claim process if the insurance company has reason to question whether it is properly maintained.
More from Personal Finance:
Emergency savings fall into the pandemic
Avoid making these investment mistakes, warn professionals
‘Super savers’ make sacrifices to help achieve goals
In addition, important documents, such as tax returns and birth certificates, must be stored safely in a watertight container. Duplicates must be stored elsewhere with a trusted person when stored electronically (i.e. on a flash drive or online cloud storage).
You should also have an emergency plan in case a disaster forces you out of your home, experts say. While this can be more difficult to pin down during the pandemic, keep in mind that a house damaged by storm can be unlived until repaired.
Keep in mind that if you sustain damage to property and your home is located in a federally declared disaster area, the loss may qualify as a tax deduction.
Subscribe to CNBC on YouTube.
.
