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Flood Insurance Can Be Full of Surprises

Westchester residents preparing for Hurricane Irene should check their property insurance policies ahead of the coming storm, experts advise.

While wind-caused damage, including removal of trees that fall on homes, is a core coverage of homeowner insurance policies, many insurers imposed changes in coverage for damage from hurricanes and tropical storms after Hurricane Katrina, the costliest U.S. hurricane in history, for which insurers paid an estimated $41.1 billion in claims.

In particular, many insurers in eight downstate counties including Westchester imposed hurricane deductibles in the last several years, separate from the standard homeowner insurance deductibles for property loss. These new deductibles, which are typically 1% to 5% of a home’s insured value, are triggered specifically by hurricanes or named storms declared by the federal government’s National Weather Service, says Michael Barry, a spokesman for the Insurance Information Institute, a non-profit, non-lobbying industry group.

The triggers, however, vary widely according to the individual insurance carrier in New York State.  A complete list is available on the New York State Insurance Department website at www.ins.state.ny.us.

For example, a $300,000 policy with a 2% hurricane deductible would leave the owner responsible for up to $6,000 in property damage before the insurer starts paying. These policy details generally are covered on the declarations page of the policy at issuance or upon policy renewal. Homeowners should check their policies or call their insurance agents for clarification.

“Review your homeowner policy this week," Barry says. "Feel confident you are covered for wind-caused damage, but if you live in downstate New York, check for hurricane deductibles and which events trigger that deductible.”

The vast majority of homeowner and renter policies exclude coverage for the kind of flood damage that is expected from Hurricane Irene. Homeowners, renters and condo owners who need flood coverage must purchase it separately from the federal government’s National Flood Insurance Program.

Lenders generally require homebuyers in flood zones to purchase flood insurance from the program as a condition of receiving a federally backed mortgage. Flood policies can be purchased directly from the NFIP or from their property-insurance agent. Policy coverage on residential properties is limited to $250,000 on the dwelling and $100,000 for contents. There is a maximum limit of $500,000 on commercial buildings and contents.

Additional coverage is available for high-cost properties from some high-end insurers and from specialized carriers. The policies exclude most basement furnishings, however, and don’t include the cost of temporary relocation if the homeowner is displaced.

“Homeowner policies do not cover flood damage, so if the hurricane breaks your windows or puts a tree through your wall that’s covered, but if it puts 3 feet of water in your living room, it is not covered,” says Tim Dodge, director of research and media relations for the Independent Insurance Agents and Brokers of New York, a trade association representing insurance agents in the state.

The average flood claim nationally during the last 10 years was nearly $48,000, according to the federal government.

For more information on flood insurance, visit www.floodsmart.gov, the website of the NFIP, which is a program of the Federal Emergency Management Agency.

Flood insurance is also available for businesses. Annual premiums start at about $350. They are much higher in high-risk areas. Be aware that policies don’t take effect until 30 days after the policy is issued, so it is already too late for most residents to buy coverage for this storm.

In 2008, an insurance institute survey found that 17% of Americans had a flood policy.

Damage to vehicles from flooding and downed trees is covered by comprehensive automobile insurance policies. More than three-quarters of auto owners carry comprehensive and collision coverage in addition to the liability insurance. For more detailed information on property insurance coverage for flood and wind-damage, go to the Insurance Information Institute website at www.iii.org .

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