The seventh largest quake ever occurred March 11th. The eighth largest quake occurred last year. The third largest quake occurred in 2004. Add to this hurricanes and floods, and it seems like natural disasters are on the rise.
Everyone should be well aware by now, earthquakes and tsunami’s like Japan recently suffered are not normally things insurance covers. No one wants to find out AFTER THE FACT that their homeowner’s insurance doesn’t cover them for a disaster. Let’s look at what your homeowner’s insurance doesn’t (or may not) cover.
Flood
Flooding is not covered by homeowner’s insurance, PERIOD. No gray area, no loopholes.
Let’s be specific about what a flood is so you can decide if you need a separate flood policy through the National Flood Insurance Program (NFIP). That flood insurance policy can still be purchased through your local agent.
FEMA defines a flood as “excess of water on land that is normally dry.” The NFIP considers a flood “a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:
- Overflow of inland or tidal waters;
- Unusual and rapid accumulation or runoff of surface waters from any source;
- Mudflow; or
- Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.”
On the bright side, a burst pipe is considered a covered claim by most policies, however, there may be fine print that allows your insurance company an out even in this case, so be sure to read your policy carefully!
Earthquake
Depending on where you live, this could be a critical exclusion. The western United States receives the most earthquakes, but according to the United States Geological Survey, they can still occur throughout the rest of the country.
Earthquake insurance (not part of your regular homeowner’s insurance) should cover the cost of replacing your property or repairing damage to it. When reviewing this insurance, consider the following:
- Will only your dwelling be covered?
- Will detached structures be covered?
- Will your contents be covered as well as loss of use for expenses incurred if you have to live elsewhere during repairs?
- What isn’t covered?
- What is your deductible?
That last one is usually pretty high with earthquake coverage, so be sure you know what your deductible is.
Loss Assessment
If your condominium, co-op apartment, or townhome is part of a homeowner’s association, your homeowner’s policy should include loss assessment insurance. Loss assessment provides coverage for damage to the common areas owned by all residents. If the association charges all residents to pay for damages, this coverage will provide for that.
Homeowner’s Insurance exists to protect you, your family, and your assets in case of an emergency. Make sure you’re adequately covered BEFORE a disaster strikes.
Homeowners insurance rates may be going up with new hurricane modeling software. The new software package from Risk Management Solutions, Inc. goes way beyond the criteria that other models project.
The factors include the size of the hurricane and how much of it is still over the water, how fast it is moving, and whether a storm is strengthening or weakening just before landfall. Terrain also plays a role; a storm will be torn apart by mountains, but will be able to gather fuel from swampy areas like the Everglades in hurricane-prone Florida.
The model also accounts for the spike in the cost of construction materials after a storm and updates assumptions about the damage that even a moderate hurricane can do to commercial buildings in some regions to reflect the strictness of local building codes—and how well those codes are enforced.
Gone are the days where only those living in the coastal regions of hurricane country have to bear the brunt of the extra fees in their homeowners insurance. Now the risk will be spread out further and wider.
Of course, if you live on the coast don’t expect your premiums to go down any.
If you’re a homeowner, chances are your house is worth less than it was five years ago. But you could still be paying more to insure it.
Despite the deep housing bust of the last few years, the cost of rebuilding a damaged home — in other words, what you pay insurance for — has not changed much, according to industry experts.
That means that unless you have reduced coverage or increased your deductible, chances are you are paying as much or more to insure your home as before the housing bust.
In this topsy-turvy housing market we’ve seen in the past few years, it’s possible that the cost to rebuild your home is actually more than you could sell it for. The insurance also usually must be enough to cover how much is owed on a person’s mortgage, even if that is more than the value of the home. These days, it’s also possible you owe more on your house than you could sell it for.
Still, experts say that doesn’t mean you should accept a big jump in your insurance rate when you get your next bill. After all, a big factor in rate increases could just be the inertia of simply accepting the new premium each year.
You should look carefully at your bill to see why it has increased. You also might want to check if you can reduce your rate by making home improvements such as adding a better fire prevention system, or making lifestyle changes such as stopping smoking.
It’s also a good idea to shop around to see if another provider can get you the same coverage for a lower price.
A 2008 survey of Consumer Reports subscribers found that about half of those who switched insurance carriers in the prior four years were paying less for coverage.
While a really great insurance rate may be alluring, you should be cautious in accepting a new policy purely based on price. Check consumer websites and your state department of insurance website to make sure that your insurance carrier will treat you well in the event of a claim.
When you’re buying insurance, all you’re buying is a promise.
Looking for an alternative to traditional insurance that costs less? You should know about “Medishare”.
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