One year ago, Superstorm Sandy struck a dozen states in the Northeast and became the third costliest storm in U.S. history, after hurricanes Katrina and Andrew, according to the Insurance Information Institute (I.I.I.).
“Every disaster offers lessons learned for future events and Sandy was certainly no different,” said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “If we can learn from this disaster, we can be better prepared for the next one.”
Here are four key takeaways from the disaster:
1. Consider purchasing flood insurance. Ninety percent of all natural disasters are accompanied by some form of flooding. However, flood damage is not covered by standard homeowners, renters or business insurance policies. Instead, separate flood insurance is available from FEMA’s National Flood Insurance Program (NFIP) and a few private insurance companies. Many Sandy victims did not have flood insurance and were either uninsured or underinsured for the disaster, which was the second costliest U.S. flood, based on NFIP’s payouts as of July 12, 2013.
The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. Coverage for the structure on an NFIP policy is on a replacement cost basis (what it would cost to buy it new) and contents coverage is on an actual cash value basis (the depreciated value). For additional insurance protection over and above the amounts in an NFIP policy, excess flood insurance is available from private insurers. To learn more, see our information on flood insurance, go to FloodSmart.gov or talk to your insurance professional.
2. Understand the differences between a homeowners policy and a flood insurance policy. A standard homeowners policy is different from an NFIP flood insurance policy in many ways. Coastal residents should ask their insurance professional to explain the differences, so they understand exactly what is and is not covered under each policy.
For example, a standard home insurance policy provides coverages for additional living expenses (ALE) if the home is damaged by an insured disaster listed in the policy. This would provide reimbursement for costs associated with living elsewhere while the home is being rebuilt.
An NFIP flood insurance policy does not provide ALE. In addition, coverage for the contents in a basement is very different. The NFIP put limits on this type of coverage that do not exist in most standard home insurance policies. In addition, the NFIP flood insurance policy includes very specific definitions of what is considered a basement, while standard home insurance policies generally do not.
3. Know if you have a hurricane or windstorm deductible. Do you have a hurricane or windstorm deductible in your policy? And how will it affect your claim? A standard homeowners insurance policy deductible is usually expressed as a dollar amount, for example, $500 or $1,000.
Hurricane deductibles, however, are calculated as a percentage of the insured value of a house. Hurricane deductibles apply solely to damage caused by hurricanes, and typically vary from 1 percent to 5 percent of the insured value of a home. Whether a hurricane deductible applies to a claim depends on the specific “trigger” selected by the insurance company. These triggers vary by state and insurer and usually apply when the National Weather Service (NWS) officially names a tropical storm, declares a hurricane watch or warning, or defines a hurricane’s intensity. Windstorm deductibles apply to any kind of wind damage and are generally also percentage based. A deductible is the amount of money you pay out-of-pocket before your insurance coverage kicks in.
4. Renters need insurance too. In New York City, 69 percent of residents rent their homes so a large number of renters were impacted by Sandy. Unfortunately, many learned that their landlords were not responsible for damage to their personal belongings caused by Superstorm Sandy as many did not have renters insurance.
Indeed, a 2013 I.I.I. poll found that only 35 percent of renters in the U.S. have renters insurance. A renters insurance policy costs about $185 per year, on average, and provides coverage for personal possessions damaged by wind, fire, theft and other disasters listed in the policy as well as the costs associated with living elsewhere while a rental home is being repaired. Renters can also purchase flood insurance from the NFIP to protect their possessions.
It is equally important to be prepared for a disaster; here are some steps you can take:
• First, review your insurance. The time to review your insurance policy is before you have to file a claim. Make sure that you have both the right amount and type of insurance. You should have enough insurance to rebuild your home and replace all of its contents. The I.I.I. has information on how much insurance you need to purchase as well as an iPhone app, Know Your Coverage, which guides you through the process of getting the right type and amount of coverage for your home and belongings.
• Second, create a home inventory. A home inventory is a list of all of your personal possessions and their estimated value. An up-to-date inventory will help you: purchase the right amount of insurance; speed up the claims process by substantiating losses; and provide documentation for tax purposes or disaster assistance. In order to make the process of creating and updating an inventory easier, you can use Know Your Stuff® Home Inventory, the I.I.I.’s Web-based software and mobile app. Learn more about creating an inventory, and watch the I.I.I.’s home home inventory video.
• Third, disaster-proof your home. Talk to your insurance professional about ways to keep wind and water out of your home. For instance, you may want to invest in storm shutters and reinforced garage doors. More information can be found at the Institute for Business & Home Safety (IBHS) or the Federal Alliance for Safe Homes (FLASH).
• Lastly, have an evacuation plan. Decide ahead of time where you will go and how you will get there, and have more than one option. The I.I.I.’s iPhone app, Know Your Plan, provides interactive checklists that will help you plan ahead to better protect yourself, your family, your home, and even your pets. If you have pets, contact your veterinarian for a list of boarding kennels and facilities or ask your local animal shelter if they provide emergency shelter or foster care for pets. Also identify hotels or motels outside of your immediate area that accept pets.
Source: Insurance Information Institute
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