Is Your House Protected?
Hurricane Danielle is our first named hurricane since July of 2022 and marks a stretch of inactivity not seen since 1941. As a Florida resident still coping with supply chain issues from Covid-19, I'm thankful Danielle will stay far off our coast and for the unseasonably slow start.
Just because we have been fortunate this year doesn't mean we shouldn't heed Alexander Graham Bell's advice; "Before anything else, preparation is key to success." As planners, we have offered general suggestions to prepare financially for this year's hurricane season. Looking at it in more detail, hurricane damage brings a heap of confusing rules for insurance coverage. Since this year's season has afforded us more time, let's dive further into the details about what's covered, what isn't and how you can adequately protect your home.
Does my Homeowners Insurance Cover Hurricane Damage?
Resorting to my most common answer to financial questions, "it depends." Most homeowners' insurance policies cover wind damage and wind-driven rain during a hurricane. So maybe. On the other hand, home insurance won't cover flood damage, so maybe not. You'll need a separate flood insurance policy to protect your home against hurricane storm surges.
It's also worth noting, homeowners' insurance companies usually charge separate wind, named storm, or hurricane deductibles before paying for damage. The hurricane deductible is generally larger than your standard deductible, and frequently between 1-5% of your insured value.
What Is Flood Insurance?
Flood insurance is a standalone insurance policy available to homeowners living in areas at risk for floods that provides comprehensive coverage for losses caused by flooding. A flood insurance policy covers any damage related to flooding, regardless of the causes.
Who Offers Flood Insurance, and where can I purchase a policy?
The Federal Emergency Management Agency (FEMA) offers flood insurance through the National Flood Insurance Program (NFIP). If you live in one of the at-risk areas, you can purchase flood insurance directly through your insurance broker.
Various levels of flood insurance exist, so it's essential to examine policies to understand what is and is not covered. Generally, flood insurance provides a maximum property coverage of $250,000 and content coverage of $100,000, with an average cost of about $700 a year. If needed, private insurers can offer additional coverage.
What Insurance Options Should You Consider for Your Home?
Living in Florida or other at-risk states for hurricane damage warrants a closer look at your homeowners' insurance policy and consideration of a flood insurance policy.
Homeowners' insurance is the primary insurance to protect your home and its contents in event of damage and generally covers damage due to things like fire, smoke, theft, vandalism, lightning, wind, hail, or external forces, such as a falling tree.
Whether you need coverage beyond flood insurance might not be entirely up to you. Some mortgage companies and lenders will require flood insurance if you live in high-risk flood zones.
Even if flood insurance isn't required, it may still be prudent to consider a flood insurance policy. According to FEMA, almost 25% of all flood insurance claims come from areas with low-to-moderate flood risk. Low- or moderate-risk zones may qualify for a Preferred Risk Policy, a lower-cost flood insurance policy.
The Bottom Line
As a homeowner evaluating your insurance options you should consider where you live and the possibility of increased hurricanes and flood damage risks. Keep in mind a standard homeowner's policy won't cover you in case of flood damage; an additional flood policy may be needed. Your trusted insurance broker is a good resource for evaluating the coverage options necessary to keep your property protected adequately.
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