2015’s North Atlantic hurricane season got off to a relatively muted start on June 1. By some estimates, Atlantic hurricane activity in 2015 will be about 45% below the 1950-2014 long-term norm and about 50% below the recent 2005-2014 10-year norm. A number of tropical storms have formed this in the Atlantic year but have been of limited destructiveness.
Even with a drop-off in frequency, it takes only one storm to cause enormous damage and loss of life in the Caribbean, Central and South America, or North America. Superstorm Sandy in 2012 came late in the hurricane season and broke records for its size and destructive impact.
For businesses and homeowners, insurance coverage against storms is essential, especially for those based near the coast, where the impact of a tropical storm or hurricane can be the most powerful. Insurance policies can evolve over time, which is why they should be reviewed annually to understand in detail what is covered and what occurrences are outside of the policy. Certain types of coverage may depend on whether a storm is classified as a storm or a hurricane, so it is very important to be knowledgeable and current about your exact policy.
The Insurance Information Institute (I.I.I., www.iii.org) has published a thorough Hurricane Season Insurance Checklist for homeowners and renters. The “mission of the I.I.I. is to improve public understanding of insurance—what it does and how it works.” The I.I.I. provides authoritative, detailed insurance information to the news media, governments, regulatory organizations, academic institutions, businesses and the public concerning insurance.
Following are some excerpts from the I.I.I.’s Hurricane Season Insurance Checklist, which includes information for homeowners and renters:
- Check your policy limit; is it enough to rebuild your home?
Make sure to have enough coverage to completely rebuild your home in the event it is severely damaged or destroyed. And, remember, the real estate value of a house is not the same as the cost to rebuild.
Consider these homeowners coverages to help protect against the costs of rebuilding after a hurricane:
- Extended Replacement Cost Policy– pays an additional 20 percent or more above the policy limits.
- Guaranteed Replacement Cost Policy– pays the full amount to rebuild your home whatever the ultimate cost.
- Inflation Guard– automatically adjusts the coverage limits to reflect changes in construction costs.
- Ordinance or Law Coverage– pays a specified amount for rebuilding to new building codes, should your community adopt stricter codes.
- Do you know everything you own and how much it’s worth?
Imagine having to re-purchase all of your furniture, clothing and other personal possessions. Now think about what that would cost. Most insurers provide coverage for personal possessions—approximately 50 to 70 percent of the amount of insurance you have on the structure of your home. Is this enough? The best way to determine what you actually need is to conduct a home inventory—a detailed list of your belongings and their estimated value. The I.I.I.’s free Know Your Stuff – Home Inventory tool can help.
Check what type of insurance you have for your belongings:
- Replacement Cost Coverage– pays what it would cost to replace your personal possessions at their current value.
- Actual Cash Value Coverage– pays to replace your personal possessions only at their depreciated value.
- Does your policy provide enough Additional Living Expenses coverage?
Additional Living Expenses (ALE) coverage kicks in if your home is rendered uninhabitable as the result of a hurricane or other insured disaster. ALE covers the extra costs involved in living away from home—hotel bills, restaurant meals and other expenses, over and above your customary living expenses—incurred while your home is being repaired or rebuilt. If you rent out part of your home, this coverage also reimburses you for lost rental income.
Check that the coverage is adequate for your needs:
- ALE coverage is generally equal to 20 percent of the amount of insurance coverage that you have on the structure of your house; however, most insurers offer the option of higher coverage limits.
- Many policies provide ALE reimbursements only for a specific amount of time; make sure you’re comfortable with the time limits in your policy.”
Can your insurance withstand a hurricane? Check your policy, and check the I.I.I. for more information here www.iii.org.