Hurricane season officially began June 1 and lasts until November. What that means is the possibility of fast moving winds, horrific downpours, and drenching floods. Along with Mother Nature’s wrath may come deaths of people and pets, power outages, and loss of real estate property, and belongings.
While we can’t stop nature’s destructive path, we can do a better job of heeding warnings to evacuate when necessary and building properly according to area codes. It is also crucial that we insure homes and investment properties to guarantee we have the funds to replace what’s lost, rather than lose our valuable investments. This is true whether they’re homes lived in or rented out. And if rented and rendered unusable by the storm, that means investment dollars temporarily lost.
For advice about protection from hurricanes and floods, we turned to Tim McCoy, managing director of Insurmark, which offers flood and catastrophic coverage for residential and commercial properties as a Managing General Agent at AON. Insurmark is based in Springfield, Ohio.
He shared these seven key strategies:
1. Assess your property’s risk. You can easily learn if your home is in a high-risk flood area as different zones are depicted on a community’s flood insurance rate map that the federal government’s FEMA system established. V zones, for example, are coastal areas with a 1 percent or greater chance of flooding. Additional risks exist due to storm-induced surge. Homeowners may also wish to secure an elevation certificate that will provide additional detail regarding their exposure to flood risk. If you live in a V or other high-risk zone, you’ll be able to buy subsidized insurance from the federal government’s program known as the National Flood Insurance Program or NFIP, which has been available since 1968. Know that it’s essential to do so to secure a mortgage in such a location. Private alternatives to the NFIP are also becoming more prevalent. Insurmark can offer alternatives that may be more comprehensive, or better priced. It’s all dependent upon risk characteristics.
2. Be prepared in other locations, too, just in case. Not buying coverage even if you live in an area not deemed a risk may prove dangerous. It’s a roll of the dice since weather has become more unpredictable in recent years. In fact, at least 20 percent of all floods happen in those areas not in the riskiest zones, McCoy says. As an example, he cites the city of Baton Rouge, LA, which isn’t located on the coast and experienced 20 inches of rain in a 24-hour period back in August 2016. The result was that about 200,000 homes experienced damage and 80 percent of them didn’t have flood insurance. “They didn’t think they needed it,” he says. Check your area for more details on such sites such as https://www.floodpartners.com/ and www.floodtools.com
3. Get the right amount of flood insurance. Determining the correct dollar value to purchase can prove difficult as flood insurance can be costly. Furthermore, there are many variables to consider, from your specific geographic area and its risk to the value of your home and contents. For example, the NFIP provides up to $250,000 in property coverage and an additional $100,000 in contents coverage on a residential property. A Preferred Risk Policy may have an annual premium at about $750, but a property located in a higher risk zone may be much more expensive, McCoy says. For those who don’t think that’s enough coverage, they can secure excess or more coverage from a private firm like Insurmark, which will vary depending on the amount desired. Even if it’s double for a total of expense of $1,500, it may prove worthwhile for that what-if situation, McCoy says, since the average flood claim is about $46,000 for damage to carpet, drywall, replace furnishings and remediate mold. “Even a few inches of water can cause a lot of problems,” he says.
4. Understand exactly what flood insurance covers—and what it doesn’t. Many don’t have a clear picture, McCoy says. A flood policy covers the building property itself and essential systems in a home such as electrical, plumbing, water heater, built-in appliances, sump pump, washing machine and dryer, windows, and wood floors. But double-check by reading a policy’s fine print thoroughly. Flood coverage is limited in basements and areas below the lowest elevated floor. Make sure to discuss this with your agent, so there is no misunderstanding after an event. Wind and hail damage to a home or the damage from fallen trees are another matter. They should be covered by a traditional homeowner’s insurance policy. When a claim has been filed, an insurance adjuster will determine the damage and its cause—whether wind or flooding, McCoy says.
5. Importance of occupancy. Occupancy matters when it comes to insurance. Home owners who leave the premises vacant are leaving their home more susceptible to damage that they may not catch for days, weeks or even months. Most policies will deal directly with occupancy.
6. Importance of taking precautions. Doing your homework in advance can safeguard your investment and result in lower costs. Homes built on a beach atop elevated pilings will influence the underwriting criteria and possibly lower the insurance cost versus a property that is not elevated, McCoy says. Stricter building codes that dictate how and where a home is built, with what type of materials and how the wiring and plumbing are done are also helping to make a difference in improving protection from floods, McCoy says. And to make the claim handling process easier, valuables and important documents should always be kept on higher ground or even off the premises. There should also be photocopies or a video of everything valuable so when it comes to determine the replacement cost it’s already been documented.
7. Choosing an insurance carrier. Go with a company that’s financially stable and been around for years and will be around longer, so when you need coverage it’s available. One way to be sure that’s the case is to go only with a firm that has earned an A-rating from a credit-checking business such as M. Best Company or Standard & Poor’s.