Some Things To Consider When Buying Insurance

Despite the fact that auto, home and health insurance rates are on the rise, there are always ways to save money on these necessities with a little ingenuity. In our free enterprise economic system, you can always find a better deal on anything by comparison shopping. The trick is to know, down to the last detail, the insurance coverage you are comparing.

Auto Insurance
Your agent will determine your auto insurance rates by assessing your risk and comparing it in an insurance tier system which considers your age, gender, profession, type of automobile, credit rating, driving record, and other factors. Now, some of these factors, like age and gender are not subject to manipulation, while some of the others are.

Credit scores are used by insurers to predict how responsible a person you are. If you have a habit of being late on your credit card payments, insurers can raise your rates. Improve your credit report by repairing any errors and stay on time paying your bills. Everyone knows blemishes on your driving record can cause your insurance rates to go up, but you can also do something about that. Aside from criminal offenses, minor traffic violations can be erased by completing a Driver Education Course.

By raising your deductible, you can also lower your rate. By installing theft deterrents like the LoJack Theft Recovery System, some insurers will discount your rates by up to 35%. Buying a previously owned vehicle instead of a new car is another big money saver.

Home Insurance
Homeowners are acutely aware of the importance of keeping within a budget and saving here and there. Start off with the no-brainers first, like comparison shopping and improving your credit score. Raising your deductible by $500 can save you 12% on your premiums. Bundle your home and car insurance for a discount. Install dead bolt locks, smoke detectors, and burglar alarms. Make payments electronically to save a $5 per payment handling fee. Check your home insurance policy yearly to change your coverage if you add or remove valuable assets from your home.

Health Insurance
Those of us with an active health insurance policy, either from our employers, or purchased outright, can save money on health insurance rates by raising the deductible and also asking for generic rather than brand name prescriptions. During the open enrollment period which occurs once a year, insurers allow members to make changes to their coverage. This is the only time you can remove a dependent who is no longer using your policy or remove other coverage that can save you on your premium

As more employers are cutting back on benefits they offer new hires, group health insurance is no longer something that can be counted on. If you do not receive health insurance benefits, one way to obtain cheap health insurance is through membership in an association or club which has procured health insurance at a reduced rate for its members. AARP (American Association of Retired Persons) offers health insurance discounts for its members. If you are a member of a trade association, such as National Association for the Self-Employed you can sign up for coverage through them.

Why You Should Consider Flood Insurance

Homeowners insurance policies specifically exclude flood.  All of them.  Yours, too.  That’s something a lot of people don’t know and find out the hard way.  You don’t have to live on the coast to be the victim of a flood, either.  My wife has a pretty tragic story from her childhood about flooding.  It’s served as something of a lesson for us as we buy the new house.

When my wife was little, her family lived somewhat near (within a mile) a river.  Thing is, to look at the river, you’d never even consider the possibility of it overflowing its banks.  The water is way down a drop-off – probably 15-20 feet below the level of the town.  Her parents actually inquired about flood insurance, but were told that the area was in a hundred year flood plain and they couldn’t buy flood insurance.

I guess it was the hundredth year because the unthinkable happened and after a particularly heavy rain storm, the river rose and didn’t stop until half the town was underwater.  My wife’s childhood home was ruined.  When the water receeded, the first floor was buried in mud.

Her parents’ homeowners insurance, of course, did not cover the damage.  Homeowners insurance policies – all of them – specifically exclude flood.  Yours, too.

Her family got through the ordeal through a combination of very hard work, luck, and generosity, but it was a lesson my wife never forgot.

Flash-forward to our recent home-buying.

Our new house is within several hundred feet of an intermittent stream.  Right now the area’s in a drought, so there’s nothing there.  But it doesn’t take a lot of imagination to picture that ‘little stream’ growing into a rapidly-expanding lake.  In fact, the area is peppered with lakes of various sizes.  Not only that, but being on the eastern part of the country, we’re within reach of hurricanes.

Flood insurance basics

Here’s what I learned when I inquired about getting flood insurance for the new house.

  • Flood insurance is federally regulated.  That means the government sets the rates – everybody charges the same thing for the same level of coverage.
  • Your home has a 26% chance of being damaged in a flood over the course of a 30 year mortgage compared with a 9% chance of damage by fire.
  • One third of claims paid last year were in ‘low risk’ areas.
  • There are three categories of risk –  low to moderate, high, and high-coastal.
  • There is no place that can’t be insured against flood.
  • The maximum insurance you can buy through FEMA is $250,000 dwelling and $100,000 possessions.  If you want more, you go to independent insurers for what’s called “excess coverage.”
  • There’s a 30 day waiting period for coverage to begin.  It can be waived if you haven’t closed on your house yet.
  • Homeowners and renters both can buy coverage.

We got the maximum coverage and it was pretty reasonably priced – $352/year – since we’re in a low/moderate risk area.  The same coverage for a coastal dwelling is a whopping $5,358.  There’s a great reason to reconsider that beachfront property, huh?

A Guide To Windstorm Insurance

Windstorm Insurance

Most standard homeowner’s and renter’s insurance policies cover damage or loss created by wind-related weather such as hurricanes or tornadoes. However, some private insurance companies have removed wind damage from homeowner’s and renter’s insurance policies for residents living in high-risk coastal areas. If you live in a high-risk area you may need to, or want to, look into the possibility of purchasing a separate, specialty form of insurance called “windstorm insurance.”

Where to Find it

Some private insurance companies offer separate windstorm, or “wind and hail,” insurance policies. In some states where no private windstorm insurance is available, the state has created a high-risk insurance pool to provide wind and hail coverage to residents living in specifically designated high-risk areas. States offering state-sponsored windstorm insurance pools are:

  • Alabama
  • Delaware
  • Florida
  • Georgia
  • Louisiana
  • Maryland
  • Massachusetts
  • Mississippi
  • New Jersey
  • New York
  • North Carolina
  • South Carolina
  • Texas

How to Get It

If you have homeowner’s or renter’s insurance, first check your policy to learn what wind-related damage is covered under your policy. If you have a “named perils” policy it will list the specific circumstances under which you are provided coverage – i.e. fire, windstorm, hail, etc. If you have an “all risks” policy then you are covered under any peril EXCEPT for perils specifically excluded in the policy. If you have any questions or it is not clear to you when reading the policy what it covers, contact your insurance agent. His/her name and contact information should be on your policy.

If your insurance company excludes wind damage from your homeowner’s or renter’s insurance policy, you may first want to contact your agent to ask if they offer separate windstorm insurance. If they don’t, ask if another company operating in your state does. If you are unable to find private windstorm insurance in your state, you might want to look into purchasing windstorm coverage from your state-sponsored windstorm insurance pool if your state provides it.

What It Costs

You will need to pay an annual premium for windstorm insurance coverage, and a deductible when you file a claim to help pay for home damage repair following a windstorm. The deductible for windstorm insurance can either be a flat fee or a percentage of the value of your home, typically anywhere between 1 and 15 percent of the value of your home. So, for example, if your home is appraised, or valued, for $150,000 and you have a 2 percent deductible policy, you will have to pay the first $3,000 in damage-related expenses before your insurance company will pay on a claim.

If your homeowner’s or renter’s policy DOES provide coverage for wind-related damage, ask if there is a separate deductible to meet if you file a claim related to a windstorm. Ninety percent of all private homeowner’s insurance companies require policyholders to pay a separate deductible from their homeowner’s deductible for expenses caused by wind.

What Damage Qualifies for Coverage

In order for your claim to be approved under your windstorm insurance policy, typically it must be caused by a “trigger” event. Trigger events vary by insurer and state, but in coastal areas the events are typically one or more of three conditions:

  • An official “hurricane watch” issued by the National Hurricane Center, or
  • Sustained winds of 74+ mile per hour winds by the National Weather Service, or
  • A latitude/longitude point for a declared hurricane.

Remember that most standard homeowner’s policies cover damage or loss created by a tornado. Check your policy for coverage, and then ask a private insurance company agent or your state’s windstorm insurance pool representative about coverage for tornadoes.

 

Questions to Ask When Considering a Windstorm Insurance Policy

When considering a windstorm insurance policy – whether you are thinking about purchasing a policy from a private insurance company or from a state insurance pool – you should gather as much information as you can before making any formal, written commitment.  Following is a list of questions you may want to ask an agent or insurance representative:

  • What wind-related damage or “named perils” does my renter’s or homeowner’s insurance cover?
  • Do you offer windstorm or wind and hail insurance?  What does this insurance cover in terms of damage?
  • What is the premium for the policy?
  • What is the deductible for this policy?
  • Can I choose a lower premium and pay a higher deductible instead?
  • Can I qualify for any discounts on my premium, for example, by making disaster-prevention improvements related to wind damage?
  • If I file a claim against the policy, will it affect my ability to renew my policy?  Under what conditions could I be denied renewal?
  • If the property I want windstorm coverage for is a rental investment property (meaning you rent it out and don’t live there year-round), is there a “seasonal occupancy surcharge” for coverage?
  • Do I also need to purchase flood insurance in order to qualify for a windstorm policy?  If so, do you offer flood insurance?
  • If damage is created during a storm that also involves rain (i.e. a hurricane, storm that causes flooding), which policy provides me with coverage?
  • What is the process for filing a claim?
  • Who is my point of contact if I have questions or need to file a claim?
  • What happens if I disagree with how your company/the insurance pool wants to settle a claim or denies a claim?  What is the dispute resolution policy?
  • Do I need to have a home inspection done in order to qualify for the insurance?  And if so, how often do I need to have an inspection done – just once when I apply or yearly?

Check your current homeowner’s or renter’s policies first to see if you have windstorm coverage and if not, look into your other options.   A little homework now may provide you with some much-desired financial protection in the aftermath of a damaging windstorm.   As with your other insurance policies,  remember to keep a copy of the policy in a safe, waterproof container and keep your insurance agent’s contact information in a convenient place in the event that you need to make a claim immediately following a wind storm.

 

Understanding Earthquake Insurance

If you live in an earthquake zone, where you’ve felt the tremors of small quakes, or been through a big earthquake, you know that few things can be more frightening. Earthquakes have caused damage in all 50 states and approximately 90 percent of all Americans live in seismically-active areas. While the government may provide disaster relief to individuals following an earthquake, it will typically come in the form of a low-interest loan to help repair or replace possessions, and is not designed to protect homeowners from loss due to earthquakes.

It’s important to know that standard homeowners or renters insurance policies do not cover losses due to “shifting earth” situations – including earthquakes, landslides, mudslides, mudflows, sinkholes or any movement that involves ground shifting, rising or sinking. But for those living in earthquake-prone areas, or people concerned about the possibility of an earthquake, earthquake insurance is available in almost every state.

Homeowners, renters and condominium owners living across the U.S. can obtain earthquake insurance from private insurance companies. Earthquake insurance can provide some financial protection in the event that your personal property is damaged or destroyed due to earthquake.

What Does Earthquake Insurance Cover?

This is very important to clarify.  Earthquake insurance policies typically cover major property damage or loss due to earth movement – sinking, rising or shifting. So earthquake insurance policies typically pay to make repairs to, or replace, possessions damaged as a result of:

  • Earthquakes
  • Mudslides
  • Sinkholes
  • Mudflows

Earthquake insurance policies typically split out a homeowner’s loss into two categories – structure (the home) and contents (possessions).

What Does Earthquake Insurance Cost?

The cost for earthquake insurance varies widely.  There are two types of costs you will typically have to pay to obtain, and keep, earthquake insurance coverage – the “premium” and the “deductible.” 

Premium:  The policy premium is the amount that you will be required to pay on a regular basis, typically annually, to maintain your earthquake insurance coverage.  Premium amounts vary widely–as little as $500 to in excess of $3,000.  The amount of your premium will depend on several factors including:

  • Type and age of your house
  • Any “earthquake-proofing” improvements made by the builder or you as the homeowner
  • How close you are to fault lines
  • What type of soil is your house built on

Deductible:  Most earthquake insurance policies carry a deductible, meaning you will have to pay a certain amount first for repair or replacement of your property (home and or possessions) before the insurance company will pay for any claims you make.  Earthquake insurance deductibles are typically a percentage of the replacement value of the home – meaning how much it would cost to replace your home in the current economy.

Deductibles in earthquake prone areas are typically a minimum of 10 percent of the home’s replacement value. So if it would cost $200,000 to replace your home and your earthquake insurance policy has a 10 percent deductible, you would have to pay the first $10,000 in repair or replacement costs.

It’s important to know how your insurance company applies the deductible because most companies split a homeowner’s property into two separate categories – structure (the physical home) and contents (possessions).  If your company does, then you will have to pay the deductible for EACH category.

Earthquake Insurance for California Residents

In addition to obtaining standard earthquake insurance through private insurance companies, California residents also have the option of obtaining California Earthquake Authority (CEA) sponsored earthquake insurance.  The CEA is a state-sponsored public-private partnership to provide earthquake insurance to California homeowners, renters and condominium owners.

CEA earthquake insurance can be purchased through licensed insurance companies who are members of the CEA.  A standard CEA insurance policy carries a 15 percent deductible.  The basic CEA policy covers damage to the home, for personal property up to $5,000 and up to $1,500 in “loss of use” coverage, meaning that it will pay up to $1,500 for certain expenses that you incur if you have to live somewhere else because your home is considered uninhabitable and/or is being repaired, including such expenses as:

  • Temporary rental home, apartment, or hotel room
  • Restaurant meals
  • Telephone or utility installation in a temporary residence
  • Relocation and storage
  • Furniture rental
  • Laundry

Only structural damage counts toward meeting the 15 percent deductible.  So if you hold CEA insurance BUT the damage to your home’s physical structure is not at least 15% of its insured value under the earthquake policy, the CEA will not pay any claimed loss for structure or contents.  You are still eligible for the loss-of-use expense reimbursement up to $1,500 if you have that coverage and your home is uninhabitable for a period of time following the quake.

An Example of How the CEA Deductible Works

Let’s say that you have a CEA earthquake insurance policy that includes $200,000 coverage on your home, (the cost to replace just the structure itself); $5,000 coverage on its contents (furniture, appliance, etc.) and $1,500 loss of use coverage.  The deductible for this policy is 15% of the home’s insured value of $200,000, which means you will have to pay out the first $30,000 in expenses before the policy would pay out on a claim.  Your house and contents are damaged as the result of an earthquake and made uninhabitable, and your family has to stay in a motel for several days and eat in restaurants.

  • SCENARIO A:  If the damage to the structure of your home IS LESS THAN $30,000 (15% of the insured value of $200,000), you will have to pay all the expenses associated with damage or loss and will not be able to file a claim to receive money from the CEA for structural damage repair or replacement.  If you are temporarily forced out of your house due to the earthquake, the CEA will still pay up to $1,500 under the loss of use coverage provision for your living expenses.
  • SCENARIO B:  If the damage to the structure of your house IS MORE THAN $30,000 (15% of $200,000), you can file a claim and will receive an insurance policy payout to help with repairs and/or replacement costs.

If you hold a CEA earthquake insurance policy and you want additional coverage beyond the basic policy you can choose a CEA policy with “add-ons” including:

  • a 10 percent deductible (meaning you will have to pay 5 percent less out-of-pocket for initial costs)
  • coverage for other structures (such as extensions to the home)
  • coverage for up to $25,000 for personal property (up from $5,000 under the basic policy), and
  • $10,000 in coverage for “loss of use” expenses (up from $1,500 under the basic policy).

However, be aware that the premium (annual payment to maintain coverage) for this type of policy will be more than with a 15 percent deductible policy.

Insurance companies selling homeowners’ insurance in California are required to offer earthquake insurance in writing to all prospective customers.  The earthquake insurance policy description must describe coverage amounts, the deductible and the policy premium.  You have 30 days from the time you receive the quote to respond.  If you don’t respond, the insurance firm will assume that you have rejected the offer to purchase earthquake insurance in addition to your homeowners’ insurance.  Be sure you look for that description and ask your agent if you don’t see it when reviewing your policy.

When considering whether to purchase earthquake insurance, consider asking an agent the following questions:

  • If you are a California homeowner, ask if the insurance company participates in the CEA program or if the policy they offer is not affiliated with the CEA.  Ask how their policy compares with a CEA policy.
  • If you already have a homeowners policy, ask the company if it provides earthquake insurance and if it offers a discount for policy holders who hold both homeowners’ and earthquake insurance policies through the company.
  • What is my home’s risk for earthquake damage?  Even if you do not think you live in an earthquake-prone area such as the California coastline, you may still have a significant risk for damage due to earth-shifting incidents such as landslides in steep rocky terrain.  Ask your agent, or potential agent, how he/she is able to determine your home’s risk.
  • What, specifically, is covered under this earthquake insurance policy?  For example, what is the maximum coverage to repair or rebuild my home if it is damaged or destroyed in a quake?  Does the policy cover possessions in my house?  Does the policy cover how much I originally paid for the items or what they are currently worth?  Does the policy cover how much it cost to build my house or what it would cost to replace it?
  • What is the time limit for filing a claim with this policy?  It can be difficult to detect damage after an earthquake and sometimes earthquake damage may not be apparent until much later, so you will want to know how long you have until the deadline for filing a claim.
  • What is the premium (cost) for this policy?
  • What will my deductible be with this policy (meaning how much will you have to pay before your insurance policy will pay out)?  How is the deductible determined (meaning is it a percentage of your home’s total insured value?) What types of expenses qualify toward meeting my deductible?
  • Is there a waiting period between the time I purchase the policy and when it takes effect?  Or how long do I have to wait after an earthquake to purchase earthquake insurance?
  • What if I fail to make my payment on time?  Is there a penalty?  Will my policy be canceled?
  • Are there any additional expenses for the policy in addition to the premium?
  • What levels of coverage can I choose from?
  • How do I file a claim in the event that my home is damaged or destroyed due to an earthquake?
  • Will the premium amount automatically go up, or could my policy be cancelled, if I make a claim?
  • How quickly does your company settle earthquake-related insurance claims?
  • Are discounts available if I do anything to “earthquake-proof” my home and possessions?
  • How often do I need to renew my policy to maintain coverage and what is the process to renew?
  • Are there any conditions under which my home’s risk could increase or decrease?  How would it affect my eligibility and premium?
  • What earth-moving conditions that could cause damage to my home qualify under this policy?
  • How does this earthquake insurance policy work in conjunction with my homeowners’ policy?  For example, are there types of damage or loss that would not be covered under the earthquake insurance policy that would be covered under my homeowners’ policy and vice versa?
  • If I am a renter and looking for an earthquake insurance policy to provide financial protection for my possessions, what kind of information do I need to get in order to qualify for a policy – i.e. do I need to get my possessions appraised?  How does being a renter and not a homeowner affect my premium and deductible?  If I become a homeowner do I need to apply for a new policy?
  • If I have to make a claim against the policy, can you tell me what will happen to the amount of my premium payments after that—will they increase?

Premiums for earthquake coverage vary widely.  If you have looked at the risk and believe it would be smart for you to purchase earthquake insurance and you want to, but feel like you’re not in a position to financially afford it, consider a few options:

  • ask your agent if you qualify for any discounts
  • review your budget and see if there are any places you could cut back to build up enough savings to pay the premium
  • plan ahead and decide in advance that you will set any unexpected bonuses, gifts and even tax return money to pay the premium

Finally, if you choose to purchase earthquake insurance, remember to keep a copy of the policy in a safe, waterproof and fireproof container and keep your insurance agent’s contact information in a convenient place in the event that you need to make a claim immediately following an earthquake.  It’s also a good idea to consider setting up a household and personal property inventory book to keep a complete record of your belongings.

 

 

 

Understanding Flood Insurance Can Save You Thousands

The devastation of natural disasters like Hurricane Katrina is heart-breaking. Some of you are wondering what would happen if a natural disaster involving flooding struck in your area. Do you have insurance that would cover or help offset some of your losses in the event of a flood?

Look at your policy. Most standard homeowners and renters insurance policies specifically do not provide financial protection in the event of a flood. If you live in a high risk area for flooding, your mortgage lender may have required you to purchase protection against flooding. But if you own your home outright or you rent, you are almost certainly not required to have protection, even if you live in an area at high risk for flooding. Should you consider purchasing flood insurance? Let’s take a look at what type of flood insurance protection is available and how to think about, and evaluate, your need for coverage.

What Standard Homeowners Insurance and the Government Offer

If your home is damaged or destroyed due to a flood, your loss will almost certainly not be covered under standard homeowners insurance. Think about that carefully. If your home is damaged or destroyed due to a flood, your loss will almost certainly NOT be covered under standard homeowners insurance. And only if your area is formally declared a federal disaster area due to a flood will you be eligible for a loan from the Federal Emergency Management Agency (FEMA) to help make repairs your home or obtain temporary housing. You may also be eligible for a low-interest Small Business Administration (SBA) loan for up to $200,000 for rebuilding your home. Both of those are government loans that must be repaid. Unless your mortgage company grants you forbearance (meaning that the bank or mortgage company holding your home loan allows you to postpone your mortgage payment for a certain period of time), you are still required to pay your mortgage even if you are unable to live in your home. So you will need to pay your mortgage loan in addition to repaying your new loan(s).

Flood insurance can provide you with some protection against financial losses in the event that your home is damaged or destroyed by a flood. That includes damage created by flood-related conditions such as storm surges, waves, and tidal waves.

Basics of Flood Insurance

Flood insurance is provided by the federal government through a program called theNational Flood Insurance Program (NFIP). In order to obtain this federally-backed flood insurance, you must live in an NFIP community. To find out if you live in an NFIP community, an area that participates in the NFIP, visit FEMA’s Community Status Book.

If you live in an NFIP community and in a designated high-risk flood zone, you WILL be required by your mortgage company to purchase flood insurance. If you live in a community that participates in the NFIP but do not live in a high-risk flood zone, you can still purchase the same flood insurance policy to provide you with coverage. If you live in a low-to moderate-risk area for flood damage you may qualify for NFIP’s low-cost Preferred Risk Policy. To determine your home’s flood risk, enter your home address on the Floodsmart.gov site. You can also determine your home’s risk for flood damage onFEMA’s Flood Mapping Platform.

Forms of Flood Insurance and Standard Coverage

There are three forms of NFIP flood insurance policies:

  • “Dwelling” policy: for most standard homes and homeowners
  • “General Property” policy: for apartments and businesses
  • “Residential Condominium Building Association Policy”: for condominiums

Under a standard flood insurance dwelling policy, the foundation of your home and equipment necessary for the home’s normal function (i.e. furnace, water heater, electrical system) are covered if damaged or destroyed as a direct result of flooding. You can purchase separate coverage for your personal possessions (such as furniture, appliances, clothes, etc.).

Levels of Coverage Available

With flood insurance, homeowners can insure their homes for up to $250,000 and contents (possessions inside the home) for up to $100,000. Renters can purchase flood insurance coverage for up to $100,000 for their personal possessions. People who own rental properties (single-family houses, condominiums or townhomes) that they rent out to tenants can insure their building and contents for up to $500,000 through the NFIP program. There is a 30-day waiting period for flood insurance, meaning that the policy does not take effect until 30 days after purchasing it.

If you want to purchase additional coverage above the standard NFIP $250,000 property limit and $100,000 content limit, you can purchase Excess Flood Protection through private homeowners insurance providers. Contact your agent to see if his or her insurance agency sells Excess Flood Protection or if he/she can recommend an agent in the area that does sell it. If you cannot find a local agent that provides Excess Flood Protection on your own, visit the Floodsmart.gov website for assistance.

Sometimes following a flood, homeowners are required by law to bring their homes up to current community and/or state safety standards. If you have flood insurance through NFIP and your home is declared damaged by local officials, you can receive up to $30,000 in Increased Cost of Compliance (ICC) funds to make necessary repairs, or to demolish, your home.

Evaluating Your Need for Coverage

Once you have determined what your home’s flood risk is, and if you live in an NFIP community, you will want to evaluate your sense of the need for flood insurance coverage. If you are not required to carry it, then it really is your choice. It’s a choice that will require you to think about how to balance:

  1. risk of the event happening
  2. the likelihood that it will happen and
  3. your ability to deal with any damage or loss you might occur if your home is flooded and you do not have insurance.

While you may feel like a significant flood is unlikely, all it can take is one heavy flood to severely damage or destroy your home and/or possessions. That’s what insurance is for  to help provide a level of financial protection for extraordinary circumstances, in case it happens to you.

So when considering flood insurance as a means of helping protect the value of your home and possessions, you will probably want to gather information, to weigh getting flood insurance against your current financial situation, the risk that a potential flood could occur, and then make an informed choice. Let’s look at how to find the help and answers you need to some important questions about flood insurance.

Finding an Agent and Purchasing a Policy

If you currently hold homeowners or renters insurance and losses due to flooding are not covered, you may want to first contact your insurance agent to learn more about flood insurance and to see if he or she can sell you a flood insurance policy. You can also visit the NFIP site to find a list of insurance companies in your area that offer flood insurance, or contact your state’s insurance commissioner.

Some Questions to Ask

When working through the decision about whether or not to purchase flood insurance, consider asking an agent the following questions:

  • Is my home eligible to purchase flood insurance through the NFIP program? Not every home is located in an area that participates in the NFIP program, and therefore you might not be eligible to purchase flood insurance.
  • What is my home’s flood risk? The NFIP assigns a level of risk based on a number of factors, but primarily your home’s physical location. There are four major categories of risk:
    • Moderate to Low Risk Areas
    • High Risk A Areas
    • High Risk Coastal V Areas
    • Undetermined Risk Areas

Even if you do not live near a coastal area you may still have a significant flood risk. For example if you live in a low-lying area or near a pond or a levee or dam, you may be at greater flood risk than you think. Your insurance agent can do a quick analysis to determine your home’s flood risk and explain exactly what the risk assessment means.

  • What, specifically, is covered under this policy? For example, what is the maximum coverage to repair or rebuild my home? Does the policy cover possessions in my house? Is it how much I originally paid for the items or what they are currently worth?
  • Are conditions created by flooding covered under this policy? For example, what about water damage or mold created by flooding?
  • What is the premium (cost) for this policy?
  • Is there a deductible with the policy (meaning a certain amount that you have to pay before your insurance policy will pay out)?
  • Is there a waiting period between the time I purchase the policy and when it takes effect? There is typically a standard 30 day waiting period before a policy becomes effective, so if you hear news of a coming storm, it will likely be too late to purchase flood insurance and have coverage if your home sustains damage.
  • What if I fail to make my payment on time? Is there a penalty? Will my policy be canceled?
  • Are there any additional expenses for the policy in addition to the premium?
  • What levels of coverage can I choose from?
  • How do I file a claim in the event that my home is damaged or destroyed due to a flood?
  • How quickly does your company settle flood insurance claims?
  • Are discounts available if I do anything to “flood-proof” my home and possessions?
  • How often do I need to renew my policy to maintain coverage and what is the process to renew?
  • What happens if the area in which I live increases or decreases in flood risk? How will it affect my eligibility and premium?
  • If I have to make a claim against the policy, can you tell me what will happen to the amount of my premium payments after that? Will they increase?

The average annual flood insurance premium is approximately $400. If you would like to purchase flood insurance but feel like you’re not in a position to financially afford it, consider a few options:

  • ask your agent if you could qualify for any discounts
  • review your budget and see if there are any places you could cut back to build up enough savings to pay the premium
  • plan ahead and decide in advance that you will set any unexpected bonuses, gifts and even tax return money to pay the premium

Finally, if you choose to purchase flood insurance, remember to keep a copy of the policy in a safe, waterproof container and keep your insurance agent’s contact information in a convenient place in the event that you need to make a claim immediately following a flood situation.

 

Home Insurance Overview

Homeowner’s and renters insurance are incredibly important policies to hold, yet too often, people find themselves dangerously under- or completely uninsured. They don’t discover this, unfortunately, until disaster strikes–which is precisely when the policy is needed the most. This happens, not out of any intent to screw themselves financially, but because the information was too complicated, the topic too dry, and the reality too financially unnerving. I hope these posts provide the basic and necessary information and serve as a starting point in finding which insurance is right for you.

HOMEOWNER’S INSURANCE

Insuring your home is vital to your financial well-being. Also, as your financial situation changes over time, it’s prudent to review your policy from time-to-time, as you might be able to afford better insurance and expand your policy.

Homeowner’s insurance policies generally cover the four areas listed below:

Coverage for Personal Property Usually, your house any extensions, attachments and other buildings on your property are covered if damaged–as is your property inside the house. These items are covered in the event of:

  • Fire
  • Smoke damage
  • Severe weather (hail, lightning, windstorm)
  • Explosions
  • Riots
  • Falling objects
  • Planes, trains, and automobiles
  • Vandalism
  • Theft
  • Broken pipes
  • Building collapse

It’s important to know that you are NOT automatically covered for floods and earthquakes. These policies are offered as separate entities. Also, make sure your flood or earthquake policy is up-to-date. Get to know it well. Do not assume that you are covered. Always ask the necessary questions regarding coverage.

Liability Protection This protection basically pays for accidental or unintentional injuries that occur while someone is on your property. Depending on the insurer that you have, liability coverage could possibly follow you and apply anywhere in the world. (As always, there are exceptions, so do your research.)

Financial Protection for Other Living Expenses This protection will cover you financially in the event that you might need to incur additional living expenses while your home is being repaired as a result of a covered event.

Other Things to Consider When deciding upon a homeowner’s policy you should always keep the following things in mind:

  • Do not assume that an event or a specific item is covered. Ask your agent for clarification.
  • Review your policy from time-to-time to make sure that your coverage continues to meet your ever-changing need.
  • Be aware that different policies are available for renters and residents of condos and townhouses. Do you research to find out which policy works for you.