Hurricane Season Is Here, Will You Be Ready?
The summer season is here and that means many of us can look forward to sunbathing at the beach, going on vacation, dipping in the pool, grilling in the backyard and the like. What may not be top of mind for many of us is the start of hurricane season. The Atlantic hurricane season began June 1st and ends November 30th. The eastern Pacific hurricane season began on May 15th and also ends on November 30th. We often hear from our local meteorologist on the importance of being prepared for a storm by stocking up on food supplies, generators, and batteries, but reviewing your insurance coverage is just as important. Before summer gets into full swing, take a few moments to review your insurance coverage and make sure you are properly covered before a storm hits. Depending on what you own, you may need multiple types of insurance to make sure you are properly covered.
If you own a vehicle, you likely have auto insurance. If you own an older vehicle that is worth less, you may have dropped coverage for damage on your vehicle. In order for a vehicle to be properly insured against a hurricane or other weather events, you need to have comprehensive coverage (sometimes called “other than collision”). This coverage will not only protect your vehicle from things like falling branches and flying objects, but also flooding. Also, do not make the mistake of thinking that if your vehicle is garaged in your home, the homeowners insurance will respond. Coverage for vehicles is normally excluded under a homeowners policy.
The most valuable asset that Americans typically own is their home. It is important to spend some time reviewing your homeowners policy to make sure your dwelling and personal belongings are properly covered. If it has been a number of years since you have reviewed the amount of insurance for your dwelling, you will want to consult with your insurance agent. Your insurance agent should be able to help you determine the estimated replacement cost of your home.
The coverage for your personal belongings is usually fifty percent of the dwelling value under your homeowners policy, but this may or may not be adequate for your needs. Take some time to do a home inventory to not only document what you own, but also to estimate what it would cost to replace your items. One of the easiest ways to document what you own is by taking pictures or a video with a camera. This works very well especially for items that are not expensive or rare in nature. For more valuable items such as electronics, appliances, jewelry, designer clothing, etc., you will need to also spend some time documenting things such as when it was purchased, the price paid, manufacturer, serial number, model number, etc. The more specific you can be the better. If you have receipts for those valuable items, you will want to keep this with your inventory as well. After you have determined how much coverage you need, review with your insurance agent what special limitations of coverage (if any) apply to certain classes of belongings (jewelry, gold/silverware, antiques, computers, etc.). If additional coverage is needed, most carriers offer a rider or separate policy that can be purchased to cover these items. If you do not own your home and rent instead, you can obtain renters insurance to cover your belongings. Oftentimes this coverage is very inexpensive.
For those who live in Florida, you may be eligible for wind mitigation discounts under your homeowners policy. The State of Florida requires all property insurance carriers to offer discounts if your home and roof meet certain building codes. Additional discounts may also apply for opening protections (such as shutters). In some cases, an inspection may be required by your carrier to determine what discounts you are eligible for. For more information, contact your insurance agent.
A peril that is always excluded from homeowners and/or renters insurance is flooding. If you live in a flood zone or flood-prone area, you need to have flood insurance to cover your home and personal belongings. Many insurance agents offer this coverage through the Federal Emergency Management Agency (FEMA). This coverage is especially important if you live in an area prone to coastal surge. After Hurricane Sandy hit the Jersey Shore in 2012, many homeowners who had homes heavily damaged by the storm were surprised when their homeowners insurance carrier determined that the damage to their home was caused by coastal surge and subsequently denied coverage. Even if you do not live in a flood zone, the possibility of flooding still exists. If you plan on obtaining flood insurance, do not wait for a storm to threaten your area. Coverage purchased through FEMA has a thirty day waiting period.
After you have made sure your home, belongings, and vehicles are properly covered, you will want to make sure you have any needed coverage for watercraft and recreational vehicles. Watercraft typically includes boats and jet skis. Recreational vehicles include things like all terrain vehicles, utility terrain vehicles (a four-wheel drive, off road vehicle), golf carts, and camper or travel trailers. If you own a boat and keep it away from your home (such as at a marina or storage center), make sure your insurance carrier knows where it is kept so it is properly rated.
Just as important as reviewing your coverage, you need to review your deductibles under each policy now as opposed to right before a storm hits. Property and casualty insurance carriers closely monitor storm activity and if a hurricane or tropical storm is threatening the United States, they may implement “binding restrictions.” Binding restrictions prevent policyholders from modifying coverage and/or deductibles when a storm is imminent. Special attention needs to be paid to your homeowners insurance deductible. If you live in a state like Florida, you will likely have a separate hurricane deductible which could be 1% or more of your dwelling value. If you own a $200,000 home, this would be $2,000 you would have to pay out of pocket before your carrier would cover a claim. Also make sure your emergency fund or cash reserves are adequate to pay any potential deductibles.
Preparing for a Claim
One last step to take after you have reviewed your coverage is to make sure your policies and home inventory are stored in a safe place. Consider storing photos and videos from a home inventory in a secure online account and keeping your insurance policies in a waterproof safe. If a storm hits and damages your home or belongings, you will want to have copies of your policy to understand how coverage applies. If you need to file a claim, the home inventory will allow you to prove to the claims adjuster how much all of your belongings were worth. If you are forced to evacuate due to a storm, make sure you bring these documents with you.
Even if a hurricane or tropical storm does not affect you in the area in which you live, you may be traveling to where storms brew. The busy season for cruises and vacations to the Caribbean and Latin America is typically in the summer months, at the peak of hurricane season. If you are going to be traveling to hurricane-prone areas such as these, consider purchasing traveler insurance when you book your trip. Fares for cruises and airline tickets can run hundreds if not thousands of dollars and purchasing traveler insurance for a nominal fee can reimburse you if your trip is cancelled due to inclement weather. Many traveler insurance policies offer coverage for trip interruption and/or cancellation, lost luggage, and medical emergencies. Even if you are not traveling in the height of hurricane season, keep in mind that many health insurance carriers in the United States will not cover emergency medical treatment abroad.
When preparing for hurricane season, reviewing your insurance coverage should be a top priority. A little work now can prevent a big headache later should you be affected by a storm. For more information on how to prepare for a hurricane, visit the National Weather Service website on hurricane preparedness. Additionally, when a storm does form, utilize the National Hurricane Center website to track the storm and receive warnings.
At River Capital Advisors, L.C., we are dedicated not only to providing investment management services to clients, but we also take a holistic look at your financial planning needs including insurance planning. If you have any questions or would like a free second opinion, feel free to contact us.