Disaster Will Strike Again — Are You Covered?

The biggest threat to your home isn’t a storm.

If you were living on or near the eastern coastline on Oct. 25, 2012, you remember what happened that day.

That’s the day Hurricane Sandy struck, wreaking damage or devastation in 24 states. There hasn’t been a storm of that magnitude since then (at least not as of this writing), but 2014 has seen its share of natural disasters.

One of the worst was the polar vortex that brought the coldest winter in decades to many parts of the country — burst pipes and collapsed roofs caused damage totaling billions of dollars. Besides that, twin super-tornadoes in June destroyed a small Nebraska town, another tornado leveled a town in Oklahoma, and tornadoes in the Midwest and South caused additional damage. We’ve also experienced record rainfall in some areas, causing heavy flood losses, and major wildfires in the West have destroyed many homes.

Yep, 2014 is just another year, natural-disasterwise.

There always have been, and there always will be, natural disasters. It’s not a matter of if but rather when and where.

Are you prepared?

Besides having emergency supplies on hand and a family escape plan, do you have adequate insurance? Once a disaster strikes or is imminent, it’s too late to shop for coverage.

“Chances are you haven’t read your homeowner’s policy recently — at least not since the last time you renewed it and received new documents in the mail,” says Dr. Robert Hartwig, president of the Insurance Information Institute. “If you don’t understand something, call your agent or the carrier. If there are gaps or deficiencies, they’ll be able to close those very quickly.”

If reading a policy seems daunting — as it does to most — just focus on the first couple of pages, called the Declaration pages. There you’ll find in larger print the most essential features of your policy — exactly what is covered, the amount and any deductibles or exclusions.

More damage is caused by flooding than by wind or any other event, Hartwig says, yet many people don’t know that their homeowner’s policy doesn’t cover flood losses. The same is true of earthquake damage. Depending on where you live, you may need supplemental policies covering one or both of those.

You can buy flood insurance from most carriers, provided by the National Flood Insurance Program. For details, visit floodsmart.gov.

Maybe you think you don’t need flood insurance because your neighborhood has never experienced a flood. However, your risk of damage from a storm surge may be higher than you think. Water damage from burst pipes is usually covered by a homeowner’s policy, but there are sometimes exceptions — another reason to review your policy and make sure you understand it.

Supplemental insurance for earthquake damage is available from most private carriers, and in California the California Earthquake Authority provides it. However, perhaps because there hasn’t been a major quake in the past two decades, the number of California homes covered has declined from about one in three in 1994 to only one in 10 today, meaning that many are leaving themselves needlessly vulnerable, Hartwig says.

What if you’re a renter?

You can buy a renter’s policy to cover the contents of your residence, plus add liability coverage, but again, they won’t cover flood damage. So if you live in a first-floor apartment that could be subject to flooding, you should buy a flood insurance policy, which typically will cost you only about $100 to $150 a year, according to Hartwig.

It takes about 30 days for a flood insurance policy to go into effect, so if there’s a warning of potential flooding or water is actually coming in your door, you’re too late.

Waiting to buy the right kind and amount of insurance until storm season arrives or another danger is imminent is akin to trying to time the stock market. You’re going to get it wrong.

Just as holding a well-diversified investment portfolio with a long-term perspective helps protect you from risk, so does insurance. It provides peace of mind, ensuring that your most valuable asset — your home — can be repaired or rebuilt timely and affordably should disaster strike.

Indeed, the biggest threat to your home isn’t a storm — it’s procrastination.

Originally published in Inside Personal Finance November 2014


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