Are You Ready for the Next Big Storm?

When Superstorm Sandy struck on October 29, 2012, the destruction it caused was almost too much to process.  While the entire Eastern Seaboard was impacted by the massive storm, areas on Long Island’s South Shore that were particularly vulnerable to the Atlantic Ocean and its bays were left virtually unrecognizable.  The combination of hurricane-force winds, a full moon, high tide, and an incredible 11-foot storm surge left boats scattered in streets and on front lawns.  Flooded, debris-filled streets were impassible. Trees downed power lines as they fell on houses and cars, leaving over one million New Yorkers without power.  Saltwater was everywhere and it poured into homes, destroying everything it touched. Ultimately, Sandy left behind $32 billion in damages in the state of New York, of which $6.7 billion was to Long Island’s waterfront communities.  Eight months earlier, climate scientist and Princeton University professor Michael Oppenheimer warned that what used to be once-in-a-century devastating floods in New York City would soon happen every three to 20 years. Hurricane Ida is the most recent storm to impact the tri-state area, with AccuWeather projecting that the damage it left behind will total about $95 billion.

Regardless of where you live, the undeniable fact is that storms in one form or another will happen and when they arrive in your neighborhood, they can cause tremendous physical and financial damage.  When forecasters warn that bad weather is on the way, it’s a good time to stock up on supplies and ready your property for what might be coming, but the time to prepare financially is right now.       

What type of insurance coverage do you need?

Whether you own a single-family home, a condo, or you are a renter, there are insurance policies available, but it’s important to understand exactly what coverage you are purchasing.  The majority of single-family homeowners insurance policies are HO-3s, otherwise known as special form policies. This type of policy will cover the dwelling at its replacement cost and your personal property at its actual cash value, but there are notable exceptions referred to as “excluded perils.”  Although homeowners insurance typically covers water and ice damage, lightning strikes, power surges, wind, hail and fallen trees, damage from mold, fungus, wet rot, or water damage from flooding are commonly excluded along with a host of other items. 

Earthquake and Flood Insurance

Earth movement is typically an excluded peril but homeowners in high-risk areas may be able to purchase earthquake insurance.  Likewise, homeowners can consider purchasing flood insurance.  The National Flood Insurance Program (NFIP) is managed by the Federal Emergency Management Agency.  According to FEMA, just one inch of floodwater can cause up to $25,000 of damage, which would likely not be covered under a standard homeowners insurance policy.  A flood insurance policy can cover a building or its contents, or both.  And while homes and businesses in high-risk flood areas with mortgages from government-backed lenders are required to have flood insurance, all homeowners should speak with their insurance agent to see if coverage might be appropriate. Even non-coastal locations can be subject to flooding due to poor drainage, proximity to rivers or other bodies of water and other issues.

Additional Living Expenses (ALE) Coverage

Additional living expenses or “loss of use coverage” is generally included in homeowners insurance.  If a weather event such as a hurricane or tornado either forces you to leave under mandatory evacuation order, or renders your home unlivable due to damage, insurance can cover living expenses that might include hotel costs, restaurant meals, pet boarding fees and other expenses you are now suddenly faced with while you are displaced. It’s important to note that flood damage may not qualify in activating the benefit under the coverage.  Policies generally have limits based on a percentage of your dwelling coverage and deductibles will apply.

Emergency Fund

A savings account with three to six months’ worth of essential living expenses can help you through the difficulty of repairing or rebuilding a storm-damaged home.  Insurance may cover many costs, but you could be responsible for deductibles, laying out money that will be reimbursed later, and paying out-of-pocket expenses.  Depending on the scale of the storm, your ability to work may be impacted for weeks or months, as it was for many New Yorkers during Superstorm Sandy.   

Tips for Preparing for a Big Storm

In addition to taking recommended precautions like stocking up on non-perishable goods, bottled water, and any needed medication, have some cash available in case power outages interfere with credit or debit card processing and ATMs.  It’s also a good idea to keep your insurance agent’s contact information handy and a copy of your policy accessible.  If you must evacuate your home, keep receipts for any expenses you incur, and document any communication you may have with your insurance company so that you’ll have records to refer to when things have calmed down.

Speak With a Professional

Homeowners insurance is not one-size-fits-all.  There are different types of policies and riders that can be added to extend coverage.  You may have a high-net-worth property in a waterfront area prone to flooding or may own valuable items such as jewelry or professional electronics on which you need higher coverage limits.  Or you may need renters or condo insurance.  A good insurance agent can help you analyze your specific situation and guide you to a policy that meets your needs.

Suitable insurance coverage is one component of a healthy financial plan.  If we may provide you with further information, please contact us.