December 1, 2022

Any time is a good time to check on disaster coverage

On Sept. 28, 2022, Hurricane Ian slammed into Florida’s southwestern coast as a Category 4 storm, causing widespread flooding and wind damage, with losses estimated at more than $50 billion.

Even if you live far from Hurricane Alley, any time is a great time to check your homeowners insurance policy for weather-related coverages, exclusions, and deductibles.

Policies can vary from region to region. For example, policies in East Coast states and bordering the Gulf of Mexico often have a hurricane deductible. Many Midwestern states, more prone to tornadoes, have wind deductibles.

Amounts of these deductibles typically range from about 1% to 5%, with a minimum of $500. These percentage-based deductible are calculated on insured value, not the damage caused.

If your home is insured for $500,000 and you have a 5% hurricane deductible, you’d be responsible for covering the first $25,000, regardless of damage.

Administered by the federal National Flood Insurance Program (NFIP), a standard flood policy costs about $500 a year for $250,000 of coverage. NFIP coverage is available through many mainstream insurance agencies. About 25% of flood claims come from homeowners outside high-flood regions.

The NFIP offers two types of coverage – building coverage and contents coverage – to protect the structure, the homeowner’s belongings, or both.

If flood insurance is a condition of a mortgage, make sure to how much coverage is required. All NFIP partner companies offer the same flood insurance coverage and maximum payouts.

If you need higher limits, the NFIP may not be adequate. Federal flood insurance caps payouts for single-family home damage at $250,000 and contents at $100,000. Private flood insurance companies often offer more comprehensive coverages.

For a lot of families, NFIP is tough on the budget. But there is a cheaper alternative worth looking at: Drain backup insurance.

Drain or sewer backup protection is an add-on, or "rider," to standard homeowner insurance, usually costing around $75 a year. It covers storm water or sewage that can back up in sinks and bathtub drains, a common occurrence during heavy rains.

Homebuyers in high-risk flood areas must usually buy flood insurance, but many do not. Officials estimate less than 25% of homes in Ian’s path carried flood policies.

Being underinsured does not relieve obligations to keep making mortgage payments, though lenders may suspend mortgage installments or late payments for a limited period.

Uninsured homeowners are eligible for federal emergency grants to rebuild but they typically only cover part of losses. After Hurricane Harvey hit Texas in 2017, the average FEMA grant was $7,000. The average NFIP claim was more than $100,000.