The 2009 hurricane season officially starts today. As such, I thought I’d talk a bit about hurricane insurance. Unfortunately, according to recent reports, hurricane insurance rates are on the rise. Beyond increased premiums, issuers have been increasing deductibles and, in some cases, dropping policy holders in high risk areas.
These changes have been driven by a combination of higher than expected hurricane-related claims as well as increased costs related to reinsurance (i.e., insurance sold to other insurers to mitigate the risk of losses). Beyond this, the recent economic turmoil has put additional strain on insurance companies, resulting in pressure to increase premiums.
The good news (for us) is that we’re not really in hurricane country. The bad news is that many of you are, and thus might be in need of additional protection.
Do you need hurricane insurance?
In many cases, the damage caused by hurricanes will be covered by your basic homeowner’s insurance policy. That being said, an increasing number of policies actually exclude hurricane-related damage, in which case you’ll need to buy additional coverage. Do yourself a favor and check your policy now instead of waiting until it’s too late.
Note that, even if you do have coverage, you’ll still need to keep a decent amount of cash on hand to protect yourself. The reason for this is that the deductible for hurricane-related damage is typically a percentage of your home’s value, and can be quite high in some cases.
What about flood insurance?
Another extremely important point is that hurricane coverage is generally limited to wind damage, and thus does not cover damage due to a possible storm surge or subsequent flooding. As such, you’ll need to purchase flood insurance if you wish to be fully protected.
Something else to consider here is that, while most flood policies cover the costs associated with repairing/replacing the structure of your home and your possessions, they do not cover alternate living arrangements if you’re forced out of your home during the repairs. If this might be an issue for you, you’ll either need additional coverage, or you’ll need to beef up that emergency fund.
Finally, given the potential for water intrusion during and after a hurricane, you should check to see if you’re covered for mold damage. Mold can be an extremely expensive problem to deal with, and many homeowner’s insurance policies explicitly exclude mold damage, or at least limit the coverage associated with mold claims.