What insurance coverage do you need for major storms and floods?

It is estimated that 80% of homeowners with flood damage to their homes from Hurricane Harvey did not have flood insurance. In Miami Dade county, only 49% of homes in hazardous flood zones are covered. This has homeowners all over the United States wondering, “What storm-related insurance do I really need to protect myself?”

To answer this, I’ve brought in an insurance expert, Alan Plafker, CPIA. Alan has 40 years of experience in the

insurance industry and was recently the president of the NY Professional Insurance Agents Association. He is Vice President at Garber Atlas Fries & Associates, Inc. in Oceanside, NY, and is a Certified Professional Insurance Agent (CPIA).  His email is aplafker@gafinsurance.com.

What types of weather damage are typically covered by a standard homeowners insurance policy? 

Standard home insurance policies generally cover weather damage from wind, sleet, ice, snow, lightning, fire and smoke.

What types of weather damage are not typically covered under a standard homeowners policy? 

Flood coverage is the most important, typical exclusion.

If you are in a hurricane area, such as southern Florida or the Gulf Coast, high wind insurance may not be included in a standard policy.

Why isn’t flood insurance, and in certain areas high wind insurance, covered under standard policies? 

Insurance companies just don’t have the financial capacity on their own to pay the claims from certain types of coverage that can be catastrophic. Thus, there are pools of government guarantees. Most all flood insurance comes from the federal government, national flood insurance. This program is currently billions of dollars underfunded, by the way, and is coming up for renewal on Sept 30th. Homeowners should call their congress and senators to make sure the program stays in place.

In some areas like Florida, hurricane wind insurance also has local or state government guarantees. There are government backed pools of insurance premiums for homeowners to provide wind insurance which is managed by the government.

What does a homeowner need to know about flood insurance? 

Flood insurance can cover damage to the building, or damage to the contents, or both. You can have either, or both types of coverage. There are also different limits on the insurance for the contents and the building.

In contrast, for standard homeowners insurance, you typically have coverage for both the building and the contents.

In what cases is flood insurance mandatory?

The only case in which flood or high wind insurance is mandatory is if a mortgage company requires it. Federally insured mortgage companies are required to have homeowners get flood insurance if they are located in areas that are at a high risk of flooding. Other than that, flood insurance is entirely optional, even if you are in the worst flood zone.

Are there cases where flood insurance is not mandatory but a homeowner should still consider obtaining it? 

Yes, as we saw in Houston with hurricane Harvey, many homes that flooded were not expected to flood. If theses homeowners that were outside the hundred year flood zone had purchased it, the insurance would have been relatively inexpensive – a couple of hundred dollars.

A good thing to note is that when insurance isn’t mandatory, it’s inexpensive. When it’s required, it tends to be expensive.

Also, mortgage companies only mandate flood insurance on the structure, not the contents, as they care about the building. So, if you are in a flood zone, you should consider adding coverage for contents, to replace items damaged in a flood.

Flood insurance does not cover most of the general contents below ground level. However, mechanical equipment and electrical equipment, such as the boiler, heating and ventilation systems have some coverage.

In what cases does a policy include wind insurance and in which policies does it not? 

In areas that do not typically see hurricanes, standard homeowners insurance policies include wind coverage.

In areas like Florida or the Gulf States, because they have a separate history of hurricanes, homeowners need separate coverage for high wind damage.

What do homeowners need to know about wind insurance and damage? 

If your standard homeowners policy includes wind coverage you will have a totally separate deductible for wind damage than for other types of damage.

Your deductible for wind damage can be 3% or 5%, which can really add up. For example, if you have $300,000 of building coverage on your home with a 3% deductible, you would pay the first $9,000 for a wind damage claim.

There is also a “trigger” to determine the definition of wind, differentiating the categories of wind. What you want to understand is, what the percentage is, what the trigger is, and what your deductible is.

In areas that require a separate wind policy, such as Florida and the Gulf States, because they have a long history of hurricanes, separate coverage may need to be specifically added. A standard policy may not have wind coverage; you would need to have it added.

If a big storm is coming, and you don’t have flood or wind coverage, can you get it right before the storm hits? 

There is no standard waiting period, but usually when a storm is on the way, insurance companies will not accept any new business or increases in coverage from a week or so before until a few days after the storm has passed.

For example, by Friday of last week, Florida knew something was eminent and shut down any insurance requests.  Hurricane Irma will probably hit Florida a week after they stopped allowing new coverage, and they will probably open up again for coverage a few days after the storm.  So, that is about a two-week period (before, during, and a little after the storm) that they will not accept business.  In New York right now, for example, you can get new coverage, but next week, depending on the path of the storm, it may shut down.

What are some things that people make mistakes on with weather-related insurance? 

One mistake is in not having enough insurance. You want to have enough coverage for full replacement cost plus demolition and debris removal.

People with wind insurance may need to have special hurricane shutters on their home. This could be required on the insurance in order to be able to make a claim.

Another mistake is in not understanding the differences between flood water damage and how it was caused.  For example, with Super Storm Sandy, some homeowners had their sewers back up into their homes. This back up was caused by flooding, but not necessarily by flood waters. In this case you’d actually need to have sewer back up insurance, not flood insurance. So, it’s important to know what your insurance covers.

It’s important to note the initial cause of the damage. For example, if wind causes damage to a home, and then flood damage ensues from water entering the home, like a roof collapse, it is covered under wind, as that is what caused the damage.

Also, cases of neglect are not covered. If, for example, you don’t maintain your roof and you have roof damage, it may not be covered, even if you have weather-related damage.

How can a homeowner be sure that they have the right coverage? 

You want to make sure that you have an advisor who is independent and can make recommendations based on needs, not just on the product they represent to sell. For example, if a company doesn’t sell flood insurance, or are not able to get some other coverage options or higher limits, they may not introduce it or recommend it to you, but an independent agent would.