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Is My Insurance Enough When Disaster Strikes?

Posted in Home Ownership
November 8th 2016 by
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Q: The news coverage of hurricanes Matthew and Nicole had me worried. What can I do to disaster-proof my home?

A: Disaster preparedness is a big topic. Have supplies and an emergency plan on hand. The Federal Emergency Management Agency (FEMA) has a detailed guide for improving personal preparedness at Ready.gov.

When it comes to your home, insurance may not always be enough in every natural disaster. Read on for three insurance pitfalls and what you can do about them.

1.) Natural disaster exemptions

The pitfall: Many insurance policies specifically exclude natural disasters, or are very selective about the kind of damages they will cover as a result. Some policies won’t cover damage caused by wind-blown objects, even if they are directly related to a storm.

General policies almost never cover flood damage of any kind. Earthquakes are also on the list of general exclusion from homeowners’ insurance policies. In short, you may be unpleasantly surprised if you’re depending on your general homeowners’ insurance.

The solution: It may be necessary to purchase specific insurance to cover natural disasters common in your area. If you live in a floodplain or coastal region, speak to your insurance agent about flood insurance.

If damaging winds and storms are common, seek out storm-specific insurance. At the very least, familiarize yourself with your policy before disaster strikes. Sit down with your agent and figure out what your insurance will actually cover.

2.) Unmaintained trees

The pitfall: Much storm damage may be caused by fallen trees. Those same lovely trees that provide shade and attractive landscaping 364 days of the year can wreak havoc on your roof, fence or car – and maybe all three.

Insurance companies may claim that the damage caused by fallen trees was inevitable, and therefore not caused by natural disaster. If you haven’t maintained those trees, that alone can be used as a reason to deny your claim.

The solution: Obviously, the answer to this problem is good maintenance. Hire a professional arborist to provide an inspection and document the level of risk they pose. If they tell you there’s nothing wrong before the storm, you’ll have leverage with the insurance company.

3.) Mortgage clauses

The pitfall: Most insurance claims are just between you and the insurance company. When it comes to your house and property, though, the mortgage holder is part of the process. Insurance is responsible for covering the loss of a mortgage holder first, which means you’ll need their permission first.

It’s unlikely that a mortgage holder would object to your insurance claim out of spite, but they may not be immediately able to respond to the insurance company. They’ll have many similar claims to examine and this can delay your payments.

The solution: The best solution is to practice a form of self-insurance. This means keeping your rainy day fund well stocked to cover emergency home repairs.

While you’ll be able to refill the fund once the insurance paperwork is processed, being able to give the go ahead to contractors for needed home repairs is an incredible advantage. It’s better than borrowing the money, because your insurance company won’t reimburse you for interest accrued until you get your claim check.

There’s no better alternative to having savings on hand to deal with disasters, so make it a part of your preparedness plan.

YOUR TURN: What’s your biggest disaster worry? What do you do to keep it off your mind? Share your preparedness tips with us in the comments!

SOURCES:
http://www.thetruthaboutinsurance.com/what-is-a-mortgagee-clause/
https://www.allstate.com/tools-and-resources/home-insurance/tree-falls-on-house.aspx
http://www.marketwatch.com/story/how-to-storm-proof-your-home-insurance-2015-10-01
http://www.marketwatch.com/story/this-clause-can-keep-you-from-accessing-homeowners-insurance-claim-money-2015-03-04?mod=MW_story_top_stories

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