Although it seems like yesterday that Hurricane Harvey plowed through Texas, hurricane season is back upon us. We learned that effectively dealing with any disaster is more manageable if you execute a thoughtful plan ahead of time. Since this is a rather daunting task, starting early allows you to break the project into manageable chunks that will keep your family safe.
Obtaining flood protection generally requires a separate policy, distinct from homeowner’s coverage. These policies are offered through the National Flood Insurance Program and offers coverage up to $250,000 for a personal residence and $100,000 for personal belongings. However, this is not full replacement cost coverage, but rather depreciated coverage.
When discussing this many clients say, “Why bother, my house is out of the flood plain?” According to the National Flood Insurance Program, more than one-third of federal disaster assistance goes to people outside mapped high-risk flood areas.
Even if a house is not in the flood plain, it can still be the target of rising water. With the coast, and numerous rivers and lakes close by, many Texans are closer to flood peril than they realize.
Given this, here are a few tips to protect assets from disaster risk:
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- Don’t procrastinate. It usually takes 30 days to bind coverage—assuming there is not a named storm barreling your way. If there is, you will not be able to bind coverage until a named threat passes.
- Insure for flood even if not in the flood plain. Even if you are not close to water, natural forces can cause water to back up in very unlikely locations.
- Get renter’s coverage. Approximately 60% of people who rent an apartment or house don’t have renter’s insurance. Your landlord is responsible for the physical premises, but not your possessions. This coverage is usually quite affordable and covers a wide variety of perils.
- Don’t skimp on coverage limits. In the event of a broad ranging disaster, resources become scarce. Contractors and material prices will cost well above normal ranges. If you built your home for $125 per square foot—you may incur costs of $175 per square foot to repair.
- Focus on the big picture. Often we try to keep insurance deductibles low thinking we want someone else to pick up the tab. However, insurance is a math model in which the more risk you transfer the higher your premiums. We’d rather have higher, yet reasonable, deductibles in exchange for higher total coverage. I can replace things that cost a few thousand dollars, but not hundreds of thousands of dollars.
- Seek additional coverage. With many homes costing well above the basic limits, seek out private flood insurance for homes worth more than $250,000.
- Take pictures. Once a year, we advise clients to walk through their homes and video assets. This is great documentation and it beats having to remember everything in your home after a disaster. Keep the pictures in a safe deposit box.
- Pick your battles. I don’t want to fight an insurance company as they have deep pockets. If I have rising water—I don’t want to argue that damage was due to hurricane force winds while the insurance company contends it is from rising water. Get insurance to cover both. It may take time to sort out—but at least the big issues should be covered.
- If you do get into a fight over insurance or feel your claim is not being treated fairly—contact the insurance commissioner. Previously, we have contacted the Texas Insurance Commissioner on behalf of clients to investigate unscrupulous or overly hardnosed insurance companies. Once a complaint is filed with the commissioner, they will investigate. Knowing this, many insurance companies will soften their stance to avoid the commissioner coming for a visit.
- Get your “bug-out” bag ready. With a disaster, the odds increase significantly that you won’t be able to occupy your residence for some time. Make a list of what you need if you were going on a ten-day trip out of the country. A short list should include medicines, food, important documents, keys, codes, cash, cell-phone and phone numbers. Not only do you need to plan for the humans in your life, but the furry family members, too.