It’s hurricane season again, which means that coastal cities and states should be on guard for inclement weather. This is especially relevant right now, as the first major storm of the season — Hurricane Dorian — wreaked havoc on the Bahamas and pounded parts of the southeastern U.S. A Category 5 hurricane at one point, you could say the U.S. got lucky that Dorian wasn’t more catastrophic — but coastal cities may not be so fortunate if there’s another Atlantic hurricane.
Do you live in an area that’s prone to hurricanes? It doesn’t matter whether you’re renting or own the property that you live in, now is a good time to reassess your homeowners and renter’s insurance agreements to make sure that you’re covered in the event of a disaster. While we spend a lot of time in this space talking about investing, preparing for your financial future and suggesting various money-related tips, today we’ll focus on a different type of financial aspect this week: financial preparation.
The Cost of Flooded Property
Though the severity of hurricanes are measured based on their wind speeds, wind isn’t often the greatest threat that they pose. No, that would be flooding.
Flashback to last fall for a moment, when Hurricane Florence dropped more than three feet of water in certain areas of the Carolinas after making landfall. With this being said, it’s time to check your homeowner’s insurance policy, as while most include some sort of wind damage coverage, most do not include any coverage for flooding. (While those who rent aren’t typically on the hook for any flood-related damages, landlords and property managers should also take this time to revisit any policies they have in flood-prone areas.)
So, how can you get flood insurance coverage if your policy doesn’t offer it? You’ll need to either revise your current policy, work with another private insurer on a new policy, or purchase it through the National Flood Insurance Program (NFIP). In fact, a combination of each might be your best bet for the most comprehensive flood coverage. That’s largely because coverage is limited. For instance, an NFIP policy won’t cover all of the contents in a flooded basement outside of major appliances (i.e., washer, dryer, hot water tank, etc.).
To ensure complete coverage, an additional policy from a private insurer may be necessary, especially if your basement is finished or acts as a storage space for a lot of your belongings. Beware, however, as such policies will cost you. It’s estimated that flood insurance costs an average of $700 per year. What’s more is that it takes about 30 days for policies to take effect, so act early to get this in place. Taking out a policy when a storm has your home in its tracks likely won’t do you any good.
Hurricane Deductibles: What You Need to Know
Homes in 18 states and Washington D.C., have hurricane deductibles built into their policies. That is, you’re on the hook for a certain portion of any damage incurred from a hurricane — usually 1 to 5 percent the value of your home — and must pay that amount before your policy kicks in to cover the rest of the damages. The lower the deductible, the less you’ll have to pay out of pocket — and vice versa. But, let it be known that low-deductible plans often come with higher annual premiums.
Are Renters at Risk?
What if you rent a home or apartment in a hurricane-prone area? While you won’t be on the hook for any damages incurred to the building, you may not be covered for any damaged belongings should your home flood or the roof get taken off. We strongly advise purchasing some sort of renter’s insurance if you’re in such a situation. Such policies are cheap — usually less than $200 per year — and include coverage for personal property, relocation if you cannot return to your home immediately and more.
We certainly hope that you’re never in a situation where your home is severely damaged, but the fact is that it’s better to be prepared for such instances than not. Failure to take the necessary precautions could wind up costing you big time money, when being proactive is all it takes to acquire such policies or review existing ones.