The Ultimate Home Insurance Guide for Hurricane Season

The U.S. has been hit by many hurricanes outside of this timeframe, but that just makes getting your insurance policies in place sooner much more important. If you haven’t done so already, now is the perfect time to conduct a home insurance review.

And if you don’t currently have home insurance — or flood and auto as well — we highly recommend you do so immediately. The last thing you want is to suffer a loss, have to file a claim and then find out that your insurance policies are insufficient to pay for your losses.

The first step in the insurance guide for hurricanes is to ensure you have adequate coverage. But what does that even mean? Let’s break it down for each policy type.

Whether you’re a homeowner, renter or landlord, there are a few key similarities in coverage amounts. Each individual, whether the home is owned or rented, will need to have sufficient personal property and liability coverage.

Personal property coverage protects the policyholder’s belongings such as clothing, electronics and furniture if they get damaged or destroyed by a hurricane or a multitude of other perils. Liability coverage protects the policyholder’s financial wellbeing in the event of a dog bite or an injury on the property they’re found liable for.

Everyone should also take a close look at their policy’s loss of use coverage. This coverage helps to reimburse policyholders for unexpected expenses if a covered peril, like a hurricane, were to destroy their home and force them to temporarily move out while the home, condo unit or apartment is being repaired. We’ll talk more about loss of use coverage later in this article.

Lastly, homeowners need to ensure their home is insured up to its total value. So homes that are worth $200,000 need to have $200,000 worth of dwelling coverage. Again, we’ll dig deeper on this topic in the next section.

When it comes to flood insurance, the most important piece of the puzzle is ensuring you have a flood insurance policy in place. It may surprise you that many homeowners and renters don’t even have flood insurance, which is unfortunate because home insurance policies don’t cover flooding.

Since floods are the most common natural disaster on the planet, that means they occur outside of hurricane season as well.

There are two options for purchasing flood insurance: going through a private entity like Clovered and going through the government entity of FEMA. Private companies typically offer greater coverage at a lower price because FEMA’s National Flood Insurance Program was designed as a last resort for many people who live in high-risk flood zones and can’t secure a policy from a private entity.

In many cases, flood insurance isn’t required by mortgage lenders, so it’s imperative that you treat the policy similar to a home insurance policy. Your maximum coverage amounts need to meet the value of your possessions and home.

When it comes to insurance protection for hurricanes, auto insurance probably isn’t top of mind. But it’s a crucial piece of maintaining adequate coverage for all your possessions. Besides a home, if you’re a homeowner, what’s the most expensive item in your possession. Well aside from those pesky student loans, it’s likely your vehicle.

So why is it that many people don’t consider auto insurance a form of quintessential hurricane coverage? We don’t know. But it is.

Car owners with liability only coverage have no protection against the elemental damages of mother nature during a hurricane. For adequate protection, drivers must purchase comprehensive coverage, also known as parked car coverage.

Comprehensive coverage protects your vehicle when it wasn’t involved in an accident. So it can protect your vehicle if a hurricane knocks down a tree and totals your vehicle. It can also help if vandals scour the neighborhood after a hurricane and destroy or steal your vehicle. To make a long story short, comprehensive coverage is super important for those living in hurricane-prone areas.

For homeowners, the most important part of having adequate coverage in place is having your home insured up to its value. So if your home is worth $200,000, you need to have at least $200,000 worth of dwelling coverage.

Although it’s always a good idea to increase your dwelling coverage to 105% of your home’s value. That way you’re still covered if the home’s value increases and you didn’t have time to increase your maximum coverage limits.

But that’s not all you need to check. You should also know the difference between replacement cost or market value coverage. Let’s break them down.

If your home is destroyed or damaged beyond reasonable repairs and you’re forced to rebuild, your dwelling coverage will help pay up to your policy’s maximum for the rebuild. But it’s not as simple as that. That’s when replacement cost and market value coverage come into play.

Replacement cost coverage takes a linear approach to the rebuild, covering the exact cost of repairing or rebuilding your home to its original condition before the damage was incurred. It doesn’t account for external factors like the housing market increase in the area or where it’s located.

So if your home costs more to rebuild than it would to buy outright, replacement cost coverage will be the better option. It’s a more comprehensive approach — and a bit more costly — but it takes the guesswork out of a rebuild and keeps your savings in your bank account.

Market value coverage provides a less standardized method of rebuilding a home. It factors in the cost of the rebuild, including contractors and materials, to determine how much the policy will pay. If your home costs more to rebuild than it’s worth on the market, you may be in big trouble with market value coverage.

It may mean you have to come out of pocket to pay for the remaining expenses related to the build. If you have an older home or have put a lot of money into it via renovations, market value coverage may not be sufficient to rebuild your home entirely.

Many people have no idea how much money they’ve invested/spent on their personal belongings. When you start to add up the furniture, electronics, appliances and then you throw in all the clothes and shoes you’ve bought through the years, the number grows quickly.

You’ll need to have personal property coverage, Coverage C, on your policy. The policy maximum of that coverage should also be worth the combined value of all your belongings. But how do you keep track of their values?

The best way to keep track of the value of all your personal belongings is to keep a home inventory list. It’s just a simple list that tracks what you own and the prices you paid for them. After all, if you sustain hurricane damage and your belongings are destroyed, you’ll have to be able to prove to your insurance company what you owned.

Policyholders should understand the differences and similarities between actual cash value and replacement cover coverage. If you sustain a loss from a hurricane or many other covered perils, these two coverages determine how much money your insurance company is willing to pay to replace your belongings.

Actual cash value is cheaper than replacement cost coverage because it factors in depreciation of your personal belongings. For example, if you bought a couch for $2,000 about five years ago, that couch has been sufficiently worn. It may even be time for a new couch.

But if that couch were to be destroyed by a hurricane, your insurance company will surely not pay you $2,000 for the couch that may or may not be pretty raggedy. If the life of a couch is 10 years, your insurance company will factor in its depreciation and pay you a maximum of $1,000 for the couch (the couch is said to depreciate $200 every year you own it).

If you need to replace the couch and don’t want to skimp on the cost, you may be stuck paying $1,000 out of your pocket to replace your beloved couch.

Replacement cost coverage, on the other hand, takes a straight-line approach and doesn’t factor in depreciation. Instead, policyholders with replacement cost coverage will be paid the exact amount they originally paid for the item — even if it’s a 15-year-old computer they bought for $2,500.

Since policyholders get a better payout on a claim with replacement cost coverage, it also costs most in premiums each month. In some cases, it makes sense to insure your belongings with replacement cost coverage. However, each is on a case-by-case scenario and should be judged accordingly.

After Hurricane Katrina pummeled New Orleans and home insurance companies were forced to take the brunt of the losses, companies began requiring a hurricane deductible. Unlike a regular deductible that’s established in denominations of typically $500 to $2,000, a hurricane deductible is based on a percentage model.

Hurricane deductibles are for homeowners and are typically anywhere from 1% to 10% of the home’s dwelling coverage amount. So a homeowner with $250,000 in dwelling coverage and a 5% hurricane deductible would have to pay $12,500 toward a damage claim before their insurance company would kick in and pay up to the policy’s maximums.

Since Katrina in 2005, 19 states and the District of Columbia have enacted hurricane deductibles. Those states are Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia. As you can tell, they’re the most hurricane-prone states in the country.

If a hurricane damages or destroys your home to the tune of needing substantial repairs and forcing you to temporarily move out, loss of use coverage will be there to help reimburse you for unexpected living expenses.

The most common and costly covered expense is finding a home or hotel of equivalent size or value as the home you were forced to leave. Since you may still be paying a mortgage on the home you were forced to move from, this expense will come in especially handy.

Other covered expenses are moving and storage expenses, pet boarding fees, extra gas and food you wouldn’t have otherwise spent, and any other expenses you wouldn’t have incurred. Loss of use coverage has a policy maximum payout per claim and typically a time frame, in the duration of months, where it’ll reimburse you.