The National Weather Service (NWS) and Federal Emergency Management Agency (FEMA) are doing their annual Hurricane Awareness Week this week (link). I won’t try to echo that, but rather emphasize a couple of critical points. If you are in a hurricane risk area (and remember these extend far inland – if you include the risk of catastrophic flooding, the remnants of hurricanes can cause damage hundreds of miles inland), you need to take this opportunity before the season to make sure your insurance is in order. There are two big aspects of this: flood insurance, and deductibles.
Catastrophe insurance in the US is a fragmented, confusing mess. One of the biggest issues involves flood insurance. There is very little commercial flood insurance available in the US. For the average homeowner, the only option is the National Flood Insurance Program (NFIP) underwritten by the Federal Government. On the plus side, it’s pretty cheap since it is subsidized. If you are in a designated flood zone and have a mortgage, it’s almost certainly required as part of the loan, and so you probably got it as part of your insurance package. But if you don’t live in a flood zone or don’t have a mortgage, you may have been told you don’t need it. The thing is, most flood damage in dollar terms occurs outside the 100 year flood zones where the banks require it. There are complex administrative and technical reasons for this, not the least of which is that the FEMA Flood Zone risks as shown on the Flood Insurance Rate Maps (FIRMs) are a compromise between engineering, finance, politics, and (IMNSHO) a flawed statistical approach rather than a rational assessment of the actual risk of flood damage. Just because you are not in a designated flood zone doesn’t mean you are safe. Here is one example, from Tybee Island, Georgia:
Any rational 100 year hurricane scenario will put Tybee entirely under water. Yet the brown and clear areas above are “above the 100 year flood plain.” If you live on Tybee, you need Flood Insurance. In fact, if you live in Chatham County, GA (the Savannah GA area), you need flood insurance, as there are few areas aside from the bluff along the river, and an area at the airport, that are high enough to avoid flooding in some 100 to 125 year flood events. The good news is that in the “X500” (brown) or “X” (clear) areas the insurance is inexpensive. You can look at the NFIP Flood maps online here (link – select “NFHL viewer”).
Inland it gets a bit trickier. Certainly consult the FIRMS, but again keep in mind these are rate maps – not flood risk maps. There are a lot of occult stream channels and topographic low spots that can flood in extreme weather events. Local knowledge or surveys can help with this.
Either way figure out your actual risk. If you are flooded from rising water, your normal homeowner’s insurance won’t cover it. Flood insurance has a 30 day waiting period – and most insurance companies won’t write policies of any kind (car, home, renter) once a storm forms – so don’t wait. Do this now. Even though it’s a Federal program, your regular homeowner’s insurance agent can set it up for you.
The second aspect to be aware of are deductibles. Almost all insurance policies now have catastrophe deductibles. Insurance companies argue that catastrophic events are so costly that without them they cannot cover losses, but that’s simply not true, as a study co-authored by the writer of this blog proved (who is way too modest to point out it won the 2014 Shin Research Excellence Award). It’s really unfair to the consumer. Before you bash on the insurance companies too much, though, it’s as much the fault of the fragmented and uncoordinated State Insurance departments. In any event, unless/until the system is reformed, we’re stuck with them, and the absurd proposition that if your roof is damaged by a 90 mph wind from a thunderstorm, your deductible might be $500, but if that same roof is damaged by a 90 mph wind from a hurricane, your deductible might be $2000 or more. So in your financial planning, be aware that your deductibles from a hurricane will be higher, in some cases much higher, than you might expect.
So please take the opportunity to review your disaster plans this week, especially your evacuation plans, and make sure your insurance situation is secure.