The wrath of Hurricane Sandy will forever live in our minds. One of the saddest tales that recently came to light, was that of the town of Breezy Point, NY. Breezy Point, sometimes referred to as the "Irish Riviera", incurred not only devastating wind and water damage from Hurricane Sandy, but also lost more than 100 homes to fire. Preliminary reports indicate a transformer may have sparked the fire while Sandy's torrential winds spread the fire through five blocks of homes. Thankfully, not one life was lost to those fires.
A news reporter interviewed one of Breezy Point's displaced residents, who indicated that his home was destroyed by the fire while his son's home was ravaged by flooding. Both families were eager to be able to visit their "homes" and begin any salvage and cleanup operations.
Enter the Insurance Geek, aka, me. What a different path each of these two families will encounter as they start the claim process through the home insurance policy (fire claim) versus the flood insurance policy (flood claim).
Additional Living Expense - This coverage will pay for expenses for the family to live in a hotel, eat meals at a restaurant, rent an apartment, even pay for family pets to stay at a "pet hotel". A typical homeowners policy provides this coverage, above and beyond the amount of insurance on the home and contents. A flood policy specifically excludes this coverage.
Finished Basement/Family Room and Its Contents - A typical homeowners policy will pay to replace the paneling, bookcases, carpeting, "mancave" and furnishings, including the flat screen, comfy recliner, etc. A flood policy provides limited coverage in the basement area. Flood insurance will pay for damaged structural elements and essential equipment; i.e. central air units, furnaces, washers and dryers.
Deductible - A deductible is the amount of dollars the claim must exceed before the insurance company will participate in the claim. A typical homeowners policy has a flat deductible that applies to all instances of one claim. Some homeowner policies carry a separate wind deductible that is a % of the dwelling amount. Flood insurance has a flat deductible that applies to each instance of a claim. In other words, the deductible will apply to the dwelling claim and separately to the contents claim.
Valuation - Replacement versus Depreciated Value - Both policies require that the homeowner insure the building to at least 80% of what it would take to replace the dwelling. Once that provision is met, the typical homeowner policy will pay up to policy limits. Many home insurance companies offer "Additional Replacement Cost" coverage that will increase their maximum amount of coverage by 25%, 50% and in some cases, a "guarantee" to replace the home, whatever it costs. The flood policy, however, only allows the insured to purchase up to $250,000 coverage. So, if the home requires more than $250,000 coverage to replace it, the flood policy will not answer.
Contents - A typical homeowners policy will cover contents on a replacement cost basis. The flood policy has no provision for replacement cost on contents. The flood policy always provides depreciated coverage on contents.
Many Americans affected by Hurricane Sandy, will begin their travels in this tale of two policies. For all of us, though, it is a good time to discuss insurance needs and expectations with a Trusted Choice Agent. Spend some time assessing the replacement cost estimate of your home by visiting AccuCoverage.com. Enlist the assistance of your mobile devices to document your contents using an inventory app like "Know Your Stuff". As evidenced by Sandy, we never know when and what type of catastrophe may hit our home.
To quote Charles Dickens from his famous novel A Tale of Two Cities,
“Then tell Wind and Fire where to stop," returned madame; "but don't tell me.”
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