Do you have a homeowners insurance policy? Terrific! Do you know exactly what if covers? Probably not. And if you are counting on it to protect you from any one of a variety of natural disasters, you may find out, too late, that your coverage isn't what you expected. If disaster preparedness is important to you, here's what you need to know about your homeowners insurance.
Last year, the news was filled with the images of flooding from Hurricane Harvey and Hurricane Irma, including piles of treasured belongings destroyed by the flood waters. But flooding (alas for Michigan residents) doesn't just happen in hurricane-prone areas. Does your homeowners insurance cover flood damage to your home and its contents?
Probably not. Most homeowners policies cover some types of damage that may occur in conjunction with flooding—say damage from high winds, lightning, fire, or fallen trees. That coverage may lead you to believe that all damage resulting from a severe weather even is covered by your policy, but damage from flooding typically is not.
If you want to be assured of protection from floods, you may need to buy a policy from the National Flood Insurance Program. This program is administered by the Federal Emergency Management Agency (FEMA). When should you buy a flood insurance policy? Long before you see the water rising around your doorstep. As a general rule, flood insurance policies will not honor claims for flood damage occurring within 30 days of a policy's purchase. Just as the time to make hay is while the sun is shining, the time to buy flood insurance is before the first raindrop falls.
If you live in an earthquake-prone region, you may already be aware that your homeowners insurance does not cover damage to your possessions in the event of an earthquake. But as with floods, you don't need to live in a high-risk area to suffer a severe loss.
When most people think of earthquakes, they think of California.Even in that well-known risk zone, however, the California Earthquake Authority reports that less than ten percent of homes have separate earthquake insurance. Outside of areas known for earthquakes, the percentage is almost certainly lower.l
That is unfortunate, because nearly every state in the country experiences earthquakes. Some, thanks to human activities like fracking, are experiencing more than they ever used to. That means that even if your area doesn't have much history of earthquakes, you could still be at risk. While earthquake coverage is more costly in areas that are considered high-risk, in lower-risk areas, premiums may be as little as fifty cents per thousand dollars of coverage.
Having coverage for floods and earthquakes is one thing; making a claim and having it settled is another altogether. You will need to be able to provide evidence of what you lost, and its value. Doing so will require you, once again, to do some work before disaster strikes.
Keep an inventory of all of your valuables in one or more of the following ways: keep receipts in a file, purchase home inventory software, or take (and upload to the cloud) digital photos of valuable items and receipts.
You should keep an inventory of all of your valuables. There are a number of ways to go about doing this. As you purchase items, keep copies of receipts in a file. If you have valuables such as jewelry, art, or collectibles, have an appraisal done. Some items may be covered only up to a certain limit on your homeowners insurance policy; you may need to purchase a separate policy or a rider to make sure that you have adequate coverage for all your valuables. For instance, you may need to purchase a jewelry rider. Be aware that you need not be dripping in jewels to need such coverage; often one significant piece, like a large engagement ring, will trigger the need for a rider.
How exactly should you inventory? In addition to keeping receipts in a file, you can purchase home inventory software. Since a picture is worth a thousand words, take (and upload to the cloud) digital photos of valuable items and receipts.
Obviously, if your home is damaged, your inventory documentation could be, too. If you're reluctant to commit your inventory to the cloud, update it every few months and place it in a safe deposit box at your bank or some other safe location. Remember, if you're choosing to keep copies of your inventory in someone else's care, their home and its contents could be damaged as well. That's why experts advise keeping as much information as you are comfortable with in digital storage.
Last but not least, don't forget that if your home is destroyed by a natural disaster or cannot be inhabited for weeks or months, you will still be expected to pay your mortgage and property taxes. Make sure you have enough insurance coverage, and the right kind, to cover those expenses as well.
If you have questions about inventorying your assets or financial disaster preparedness, we encourage you to contact our law office. We can help you understand what types and amounts of insurance will protect your home and family.
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