Are You Covered if Disaster Hits? Are you Sure?
Disaster insurance is disaster insurance, right?
Wrong.
Hurricane Katrina sounded a wake up call for homeowners.
Many people who had purchased insurance to protect themselves and their property against storms discovered, sadly, that some or all of their claims were being denied.
How can this happen? Isn't insurance supposed to well…insure?
A big part of the problem arises because policyholders make assumptions about their coverage.
Some people buy a policy because they understand the importance of having it. Others buy it in order to satisfy bank requirements. Unfortunately, few actually ever read the policy.
In the end, when disaster strikes, they aren't sure what's covered and what's not – or under what circumstances.
When is water damage not water damage?
Here's an example that illustrates the point about misunderstanding coverage.
Typically, homeowners insure their property against storm damage. They may think they're covered for damage from wind and water.
In fact, the policy may well cover damage from wind and rain that occurs during the storm. But the same policy may not cover flooding AFTER the storm.
Why the difference?
In most cases, water damage after a storm means flooding. For flood insurance a property owner needs Federal Flood Insurance.
In other cases, policies may cover the cost to remove fallen trees that damage a house, but may not cover costs for removing trees downed elsewhere on the property.
It's not playing with words, it's defining the policy
If this interpretation sounds like a shell game or sleight of hand on the part of insurers, it's not. Insurers must distinguish between claims for damage – that's what a policy does. You pay a premium based on the amount of coverage you receive.
In the "water damage" example, one alternative for a policyholder is Federal Flood Insurance. Even here an insurance company can help by offering coverage beyond the Federal limit.
But the real key is being an informed buyer.
— Ask the insurance agent exactly what's covered by a policy.
— Make sure you understand the wording and the industry terms.
— Most importantly, be certain the policy covers what you want it to cover.
A knowledgeable agent will explain a policy's coverage, language and technical terms to you in detail and provide a policy that meets your needs.
Remember: if you're concerned about premium costs, you have options. A higher deductible can decrease your premium. Premiums can also be financed. Ask your agent about all options. Make sure you do not resort to under-insuring your property, because when a disaster strikes, you will only end up with less coverage than you may need.
Consider increasing your coverage to account for upgrades in materials and increases in the cost to rebuild or repair your property. Invariably costs rise when the supply-and-demand cycle accelerates after a big storm and materials are in high demand and in short supply.
Insurance is not often cheap, but it can be affordable. Paying a low premium for a policy that doesn't cover much hurts you in the long run.
Working with a reliable and well informed insurance professional, you can obtain the coverage that best suits your needs and your budget.
And you'll avoid the unwelcome surprises that so many find after disaster strikes.
Brought to you by Guardian Insurance: Always by your side.