With the National Oceanic and Atmospheric Association predicting at least one major hurricane this year, now is the time to evaluate whether your insurance can withstand the storm.
The biggest mistake people make in choosing disaster insurance? Under-insuring their assets.
"I always tell people to buy enough insurance to replace their homes or assets," said Raymond Weisbein, an insurance consultant for The Risk Management Group. "In the long-term, it doesn't really cost that much more to cover your $150,000 mortgage as opposed to the $300,000 value of your home."
Another mistake? Foregoing the advice of a knowledgeable independent insurance agent.
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"Don't let your real estate agent choose coverage for you," said Benjamin Alvarez, founding partner of Alvarez, Feltman & Da Silva, a law firm that often represents policyholders. "You have to have a very clear and concise conversation with your insurance agent."
There is no catch-all insurance policy to protect your home from a hurricane, and determining what you need can be daunting. Homeowner insurance policies differ from person to person, company to company.
“Just because a homeowner has homeowner insurance doesn’t mean that everything is covered," said Jon Moore, spokesman for the Florida Department of Financial services. Some policies cover interior damage; others cover only exterior damage. Reading the fine print is essential, say experts.
Supplemental windstorm policies are needed for storm damage to roofs and belongings inside a house or apartment. If you carry a mortgage, such coverage is likely required.
Flood insurance covers damage from storm surge; it also is required by your mortgage company if you live in a FEMA-designated flood zone. Other supplemental coverage can cover food spoilage and inflation, which ensures your policy is aligned with current construction costs. Few if any policies cover landscaping.
If you belong to a homeowners association, the outside of your property should be covered by the homeowners' association policy, said Katalina Cruz, COO of Miami-based KW Property Management & Consulting. While this covers external damage to a condo or home, it does not cover damage to an individual's belongings.
"It’s important for owners and residents in those communities purchase homeowner's insurance," said Cruz, "as it will cover any damage inside units like furniture, electronics or paintings." If you're a renter, the unit-owner isn't responsible for your personal property; you'll need renters' insurance to cover your belongings.
If you are unsure of what's on your policy or think your coverage is inadequate, Weisbein and Alvarez recommend getting another opinion from either an independent agent or brokerage firm.
Here are some questions you should consider:
- What is your deductible? Typically having a higher deductible means a lower insurance payment. The bad news: If you get hit by a storm, your policy won't pay until the amount of damage exceeds that deductible.
- With seas rising, should you consider flood insurance even if it isn't required by your mortgage holder? Weisbein says yes, especially in Miami-Dade County where land is only one to 10 feet above sea level. Flood insurance is underwritten by the federal government and costs from $250 to $500, said Weisbein.
- Is your insurance company financially sound? Check the website for Weiss Ratings, an independent ratings company, which recently ranked Florida firms for their financial fitness.
- Is your insurance company licensed and regulated in Florida? Many Floridians are surprised to learn that insurance companies that are not licensed in Florida — called "surplus lines" companies — are allowed to sell windstorm and property insurance here. As a practical matter, it may not matter that the company isn't Florida licensed as long as it has a strong financial footing. But in a dispute, such companies are not governed by Florida regulations — nor are they backed by the Florida Insurance Guaranty Association, which bails out insurers that can't pay. To check if an insurer is a surplus lines company, go to the Florida Office of Insurance Regulation website and type the company name into the search bar.
- Do I need to insure my business? If you're a business owner who leases space, you need to cover the contents of your workplace, like computers and other equipment. Also, Alvarez recommends buying cost of business interruption insurance, which covers the cost of relocating, rent and lost revenue in case of damage to one's business.