Hurricane Insurance: Do You Need It? Are You Covered Already?

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.

Other considerations

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.

9 Responses to “Hurricane Insurance: Do You Need It? Are You Covered Already?”

  1. Anonymous

    In Florida we have a state funded insurance company called Citizens Insurance. When insurance companies refuse to cover properties then the recourse is Citizens which is costly. The state and residents of Florida pick up the tab in case there is a major disaster and the insurance company cannot handle the claim. Everyone if Florida underwrites the costs now. We have had major insurance companies threaten to withdraw homeowners policies and leave the state of Florida because of the risk to their bottom line. Premiums keep going up and Up and UP!!!!

  2. Anonymous

    The unfortunate part is that while it is not soft, for large companies, insurance has not gone up dramatically. In fact, catastrophy insurance, earthquake, flood and hurricane has actually come down quite a bit in the last few years, even though it is extremely high still. My last company I was with we never bought earthquake coverage given that we could spend that money on other loss control techniques like bracing servers and upgrading buildings.

    Think about the cost of a particular coverage and see if you can use those premium funds to pay for upgrades or improvements to your facilitity. The person who referenced the wine, they could probably get that exclusion removed for a price, or maybe you can pay for a generator. Remember insurance is just a tool in a “risk managers” tool belt!

  3. Anonymous

    Technically, hurricane territory is along the entire East Coast and Gulf Coast. Although, the southern most portion of the East Coast, NC and south, will bear the brunt.

    Insurers are pricing the coverage more accurately now, as computer models are becoming more sophisticated. This is a big reason why prices are going up. Insurance companies are willing to insure any risk, provided they can accurate calculate and charge the right price.

  4. Anonymous

    I don’t know how people living in hurricane country do it. Us northerners get flak for the cold weather, but at least it’s not so terrifying! Where exactly does hurricane territory start? As far north as North Carolina, isn’t it?

  5. Anonymous

    In all probability, wind and hail (hurricane) insurance will likely drop in cost only if we have a series of hurricane seasons with no major storms.

    If this happens, the insurance company profits should raise substantially and allow them to discount their prices and compete with others.

    In the mean time, I’m paying an arm & a leg for my insurance on two properties in South Alabama. In the future, I will likely try and avoid coastal counties and at least buy two counties in from the coast.

  6. Anonymous

    Like all insurance polices, you must account for an contingenices. It is best to talk with a representative directly at the company as well as your independent agent. Too many times people are not aware of what their policies do not cover.

  7. Anonymous

    Another thing to watch for in your insurance policies is whether or not they pay for damages due to “temperature change”. I am from New Orleans and my family owns a large restaurant there in the French Quarter. While we were very blessed with limited damage from Katrina we did lose lots of wine due to sitting in hot buildings for 6 weeks (both at the house and restaurant). We were under the assumption this was covered by the various policies but both the restaurant and home owners policy had an obscure clause in it which excluded paying for damages due to “temperature change”. If you have items that could fall into this category this is something to look into.

  8. Anonymous

    The funny thing with property and casalty insurance is that the people who need the insurance the most, usually can’t get it. As you mentioned, they get dropped.

    To understand why– think about the business model: collect premiums from as many people as possible and hope not as many have claims. How to be more profitable? Collect more premiums and pay out less . . . How to payout less? Don’t take premiums from people most likely to someday need a payout!

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