INSURANCE INFORMATION INSTITUTE
New York Press Office: (212) 346-5500; media@iii.org
NEW YORK, September 13, 2011
— Hurricane Irene, with its high wind, torrential rain and flooding, was a wake-up call for the residents of many states up and down the East Coast of the United States, providing important lessons to millions of Americans on how to prepare for future storms, according to the Insurance Information Institute (I.I.I.).
“Those who take the time to prepare for a disaster are in the best position to survive a catastrophe and recover as quickly as possible.” pointed out Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I.
Hurricane season, which ends on November 30, is far from over so it is still possible for another storm to make landfall in the U.S. In fact, six of the ten most expensive hurricanes in the U.S. occurred in September and one in late October.
Damage caused by wind is one of the most consistent and major causes of property loss. Hurricanes and tropical storms accounted for 44 percent of all catastrophe losses over the 20-year period from 1991 to 2010. Tornadoes, which frequently accompany hurricanes, ranked second highest, representing 30 percent of catastrophe losses for the period.
Hurricane Irene provided a stark reminder that the entire East Coast is at risk for catastrophic storms. While Florida and the Gulf coast may have more frequent hurricanes, the Northeast also has a history of severe storms. The Great New England Hurricane of 1938 (also known as “The Long Island Express”) hit New York, Connecticut, Rhode Island and Massachusetts, causing 600 deaths, 1,700 injuries and over $400 million in damages, according to the Massachusetts Executive Office of Public Safety and Security (EOPSS). AIR Worldwide estimates that the storm would have caused $38 billion in insurance damages had it occurred today.
The I.I.I. has tips to help consumers prepare for the next hurricane or tropical storm.
1. Know Your Risk of Flooding
People often underestimate the risk of flooding. But as Hurricane Irene demonstrated, flooding occurs not only on the coast but inland, as well. In fact, 90 percent of all natural disasters in this country involve flooding, according to FEMA’s National Flood Insurance Program (NFIP).
It is important to determine the risk of flooding in your area so you know whether you need flood coverage. Standard homeowners and renters insurance policies do not cover flooding, but insurance is available from the NFIP and some private insurance companies.
Flood insurance covers direct physical losses by flooding and from flood-related erosion caused by heavy or prolonged rain, coastal storm surge, snow melt, blocked storm drainage systems, levee dam failure or other similar causes.
The NFIP policy covers homes for up to $250,000 on a replacement cost basis and the contents for up to $100,000 on an actual cash value basis. Replacement cost coverage pays to rebuild the structure as it was before the damage. Actual cash value is replacement cost minus depreciation. To be eligible for the replacement cost policy, the homeowner must insure the structure for 80 percent of the cost to rebuild the home or purchase the maximum amount of coverage provided by the NFIP. If you are a renter, you can also purchase flood insurance for the contents of your home.
If you need more coverage than is provided by the NFIP policy, excess flood insurance is available from some private insurers. Private insurance may also be available if your community does not participate in the NFIP. Coverage for the contents of basements is limited, so be careful about what you store in the basement and consider installing a sump pump.
While flooding is not covered under standard home insurance policies, some types of water damage are. This includes burst pipes, wind driven rain and damage resulting from ice dams on your roof. Some homeowners insurance policies cover sewer and drain backups, but others do not. However, you can purchase a sewer backup rider to a homeowners or renters policy in states that offer the coverage for about $50 each year, with the policy limits varying depending upon the insurer.
Action: To learn more about flood insurance and how to reduce flood losses, go to
www.FloodSmart.gov. Also talk to your insurance agent or company representative about what is covered by flood insurance versus a standard homeowners or renters policy. There is a 30-day waiting period for flood insurance to go into effect, so do not put off purchasing it until a storm is imminent
2. Understand Your Hurricane Deductible
A deductible is the amount of money you pay out-of-pocket before your insurance coverage kicks in. A standard home insurance policy deductible is a flat dollar amount, usually either $500 or $1,000. Hurricane deductibles, however, are tied to a percentage of your home’s insured value. Your hurricane deductible is clearly stated on the front page (Declarations page) of your homeowners insurance policy.
Hurricane deductibles apply solely to damage from hurricanes, and typically vary from 1 percent to 5 percent of the insured value of a home. For example, if your home is insured for $200,000, and has a 2 percent hurricane deductible, you would be responsible for paying the first $4,000 needed to repair the home.
Hurricane deductibles are incorporated into homeowners insurance policies in 18 coastal states and the District of Columbia. Whether a hurricane deductible applies to a claim depends on the specific “trigger”, which can vary by state and insurer and is usually linked to wind speeds. Due to these differences, homeowners should check their policy carefully.
Action: Contact your insurance agent or company representative to make sure you understand your hurricane deductible. This includes how much it will be as well as what triggers the deductible. Do not wait until there is another hurricane to find out whether you have a hurricane deductible and how it will be applied.
3. Maintain a Home Inventory
A home inventory is a detailed list of your personal possessions together with their estimated value. This is an important document that will help you:
- Buy the amount of insurance you need
- Get your insurance claim settled faster
- Verify losses for your income tax return
- Keep track of your belongings in order to substantiate losses when applying for financial aid after a catastrophe
There are many ways to organize a home inventory. You can do it room by room, category by category (furniture, electronics, etc.) or start with detailed descriptions of the most expensive items and put less expensive items into broad categories. If you own your home, do not forget to list items like heating systems, washers/dryers and air-conditioning units.
There are also many approaches to creating your inventory. You can simply write everything down in a notebook, or take pictures and write the information on the back of the photos or save it on your computer. If you own a video camera or smart phone, another option is to walk through your house filming and describing the contents. You can also use the I.I.I.’s free online software, which makes creating and updating a home inventory easy, and allows you to access it anywhere, anytime in the event of a disaster:
www.KnowYourStuff.org.
Action: Schedule a time to create or update your home inventory. If you have children, get them involved by asking them to help make lists or record items with a smart phone or camera.
4. Keep your Insurance Up-to-Date
The time to review your insurance is before you need to file a claim. After Hurricane Irene many homeowners and renters had little knowledge of how much insurance they had or what was covered by their policy. As a general rule, you should have enough insurance to rebuild your home and replace all of its contents. If you make a large purchase or major improvement to your home, always update your policy. And if you are a renter, get renters insurance so your possessions are covered.
You should also find out how much coverage is available for additional living expenses (ALE). These expenses could include the cost of a temporary rental home or hotel room, restaurant, meals and any other expenses incurred in the event your home is uninhabitable while it is being repaired or rebuilt due to an insured disaster. Some policies provide coverage for 20 percent of the amount of insurance you have on your house. Others may specify a time period. Additional coverage is generally available for an additional cost.
If you own a car, consider purchasing the optional comprehensive coverage when buying your auto insurance policy as it will reimburse you for weather-related disasters such as flooding, or a tree falling on your car.
Action: Schedule a time to talk to your insurance agent or company representative and review all of your policies—every year. Make sure that you understand how much insurance you have and what disasters are covered and what are not, and that you have accounted for any changes in your circumstances, such as building an addition to your home. If you need additional insurance protection, get it now.
5. Have an Evacuation Plan
For many people, Hurricane Irene was the first major disaster that required them to evacuate their home—a reminder of the importance of having an evacuation plan in place. If you have pets you will need even more advanced planning, as many public shelters do not accept animals. Here are a few key steps to planning an evacuation:
- Identify where you can go in the event of an evacuation. Try to have more than one option: the home of a friend or family member in another town, a hotel or a shelter. Keep the phone numbers and addresses of these locations handy.
- If your evacuation route relies on public transportation and/or bridge, tunnels or ferries, plan to leave early and have a back-up plan in case any of the transportation options is closed for safety reasons.
- Map out your primary route and a backup route in case roads are blocked or impassable. Make sure you have a map of the area available.
- Family members may be separated before or during the evacuation so identify a specific meeting place and ask an out-of-town friend or family member to act as a contact person.
- Plan what you will take such as medicines, first aid kits, bottled water, cash, clothing, flashlight, battery-powered radio, pet food, special items for infants, the elderly or disabled.
- Gather important papers (or copies) such as insurance policies, prescriptions, passports and social security information. Store them in water-tight, fire resistant containers.
Action: Do a real-time test. Give yourself just 10 minutes to get your family and belongings into the car and on the road to safety. By planning ahead and practicing, you should be able to gather your family members and pets, along with the most important items they will need, calmly and efficiently.
6. Learn How to Protect Your Home Against Hurricane Damage
There are a number of steps you can take to make your home more disaster-resistant. Keeping wind and water out of your home is critical to its survival. According to the
Insurance Institute for Business & Home Safety, a house is most vulnerable to high winds when the building’s “envelope” is not sealed by forms of protection such as storm shutters or reinforced garage doors. In addition, homeowners should secure loose roof shingles and seal openings, cracks and holes while also strengthening soffits such as beams, arches and staircases.
During a windstorm, loose items outside of the house can be picked up by the winds and become destructive projectiles. Be prepared to remove all outdoor furniture, lawn items, planters and other materials. Trim trees and shrubbery and remove weak branches on plants and trees.
And, if you are renovating or doing construction on your home, keep in mind that unsecured building materials or trash from partially completed homes could become airborne and pose a serious physical threat to individuals and nearby buildings.
Action: Talk to your insurance agent or company representative about ways of making your home more disaster-resistant. And find a place to store outdoor items in the event of a hurricane or storm warning.
7. Consider Specialty Insurance for Special Events or Expensive Vacations
In the wake of Hurricane Irene, there were cancelled weddings, postponed events, missed flights and stranded travelers. While there is no insurance against frustration, specialty insurance is available for the financial losses that may be incurred when expensive special events or travel are impacted. Travel insurance can also provide assistance for travelers impacted by hurricanes and other disasters listed in the policy.
Action: Ask about specialty coverage if you are going on an expensive vacation or planning a wedding.
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