Rental property owners in coastal areas should brace for extreme weather.
The National Oceanic and Atmospheric Administration (NOAA) is forecasting an active Atlantic hurricane season, with the busiest storm period less than a month away.
The Insurance Information Institute suggests the following tips to prepare for a hurricane and other disasters:
1. Review your insurance coverage
The time to review your insurance policy is before you have to file a claim. You should have enough insurance to rebuild your home and replace all of its contents.
Look into getting an extended replacement policy for the structure of your home or a guaranteed replacement cost policy, if your insurer offers one. Extended replacement cost coverage generally pays 20 to 25 percent more than the policy limit to repair or replace a damaged home. A guaranteed replacement cost policy pays to rebuild your home regardless of cost. Both are designed to protect you in the event that after a major disaster the high demand for building contractors and materials forces up the normal cost of reconstruction.
Ask about replacement cost coverage for your belongings. When insuring your possessions, you have two coverage choices. One is actual cash value (ACV), which replaces your belongings less depreciation. The other is replacement cost coverage, which replaces your property at today’s value”without a deduction for depreciation. A replacement cost policy costs about 10 percent more than an ACV policy, but is a much better value in the long run.
Find out how much coverage you have for Additional Living Expenses (ALE). If you cannot live in your home because of damage due to an insured loss, additional living expenses coverage pays for the added costs of living away from home”such as hotel bills and restaurant meals”while your house is being repaired or rebuilt. If you rent out part of your home, ALE also replaces lost income for the time you are not able to collect rent. Many policies provide ALE coverage for about 20 percent of the amount of insurance you have on your house and for a specified time period. Additional ALE coverage is generally available for an extra premium. If you have any questions about ALE, talk to your insurance professional now.
Consider flood insurance. Flood and/or storm surge-caused damage to a home is not covered by standard homeowners or renters insurance policies. But flood insurance is available through FEMA’s National Flood Insurance Program (NFIP), as well by some private insurance companies. Information on flood insurance can be found at FloodSmart.gov. It takes 30 days for a flood insurance policy to go into effect, so it’s important to buy this insurance as soon as possible.
Understand your deductible. Separate hurricane deductibles are incorporated into many homeowners insurance policies issued in the 18 coastal states from Maine to Texas. A deductible is the amount of money policyholders pay out-of-pocket before their insurance coverage kicks in. It is important to understand whether a hurricane deductible applies to your policy and how it will affect your insurance claim.
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. For example, a policyholder whose home is insured for $200,000 with a 2 percent hurricane deductible would have to pay the first $4,000 needed to repair the home themselves if the loss were caused by a hurricane. Whether a hurricane deductible applies to a claim depends on the specific “trigger,” and the criteria activating the trigger are spelled out in the policy.
These triggers vary by state and insurer and usually apply when the National Weather Service (NWS) officially declares a storm to be a hurricane. Due to these differences, it is a good idea to speak with your insurance professional to learn exactly how your particular hurricane deductible works.
If you are a renter, get renters insurance. Renters insurance will provide coverage for your personal belongings, as well as cover the cost of additional living expenses if your rental property is destroyed by a hurricane or other insured disaster. Renters can also purchase flood insurance through the NFIP.
2. Create a home inventory
A home inventory is a list of personal possessions together with information about their estimated financial value. The I.I.I.’s Know Your Stuff“ Home Inventory software and mobile app make creating a home inventory simple and easy. An updated home inventory will make filing a claim, applying for disaster aid or substantiating financial losses for tax purposes simpler should a disaster strike. And, of course, an up-to-date home inventory helps you to purchase the right amount of insurance. For more on creating a home inventory, see the I.I.I. video.
3. Have an evacuation plan in place
Know where you will go, and what you will take, if the authorities tell you to evacuate. Review the I.I.I.’s five step evacuation plan and download the podcast on evacuation for easy reference. If you have pets, contact your veterinarian for a list of preferred 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. For more information, see Including Your Pets in Evacuation and Disaster Planning.
4. Protect your property
Hurricane-proof your home by keeping wind and water out; secure roof shingles and seal any openings, cracks or holes. The I.I.I.’s Know Your Plan app provides checklists to guide you through the steps you need to take to protect your home. The Insurance Institute for Business & Home Safety (IBHS), as well as the Federal Alliance for Safe Homes (FLASH) have additional tips.
SOURCE: Insurance Information Institute
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