Does your insurance cover Sandy damage?

NEED TO KNOW
  • Hurricane Sandy expected to cause record-setting flooding in areas along the East Coast
  • The potential damage costs are still unknown
  • Check out some apps to use for the storm
Insurers are keeping a close eye on Sandy as it continues to head north and closer to shore.

As a monster mega-storm heads toward the East Coast, fleeing local leaders and residents can only hope to return to minimal damage. But with a storm of this size and magnitude, that’s unlikely. With Hurricane Sandy expected to make landfall late Monday or early Tuesday, people are remembering Irene, Katrina, Ike and Hugo, but the reality is none will compare to what Sandy is expected to drop on the East Coast.

Many people along the Eastern Seaboard are probably remembering Irene, which hit just more than a year ago. That storm caused a lot less damage than originally expected, and it’s a dangerous comparison for residents to make to Sandy, which is expected to be much wider and stronger and cause record-setting flooding. Irene caused more than $4.3 billion in damage, while the potential costs of Sandy are still unknown. What we do know is it won’t be pretty.

Insurers are keeping a close eye on Sandy as it continues to head north and closer to shore. Along the way, storm crews are working to predict the extent of flooding in the region, and with record levels of storm surge already expected, there’s no doubt that there will be some extensive and long-term damage. Storm surge is an abnormal rise of water generated by strong winds in a hurricane or tropical storm. Once it exceeds the tide level, the water has nowhere else to go but up and inland, and that's when it can cause a lot of damage to the area.

The exact location of landfall is less important than for most hurricanes, since the potential damage of the monster storm is expected to be widespread, according to experts. Sandy is expected to bring massive flooding to typically dry areas along the East Coast, as a result of the combination of an extremely dangerous storm surge and high tide, according to the National Hurricane Center.

The storm is already blasting forceful winds more than 500 miles from its center, and some areas along the coast, including New York, are expected to get record levels of storm surge. The National Hurricane Center is warning that New York Harbor and the Long Island Sound may rise as much as 11 feet above normal levels.

To give you a comparison, Irene caused surging tides that reached about 4 feet. Experts are worried that the storm may cause record-setting flooding and damage in areas along the East River. This type of flooding is something people in these areas have probably never seen before.

The areas where Sandy is expected to impact first – New York, New Jersey and Delaware — are densely packed, and getting insurance claims representatives into these areas as quickly as possible is important for a rapid recovery. Insurers have been raising home-insurance rates over the past few years as costs from claims associated with severe weather and natural disasters have risen. That means things should run more smoothly now than they would have a few years ago, but unfortunately assessing the damage is always a difficult and slow process.

For people living in areas vulnerable to hurricanes, homeowner insurance rates are typically higher. And for those who live in these areas, HLN Money Expert Clark Howard says it’s critical to understand the basics of the policy to be sure you’re getting the coverage you need.

There are also tons of other ways homeowners in these vulnerable areas can prepare for storms, including indoor preparation of supplies and outdoor preparation of windows and other threatening parts of the home such as garage doors and shutters.

Clark's family preparedness checklist

Here are some recommendations gathered by CNNMoney on what to do before a storm hits:

- Download an application to your smartphone that can notify people where you are, and if you need help or are safe. The Red Cross has a Hurricane App available in the Apple App Store and the Google Play Store. A First Aid app is also available.
- Use hurricane shutters or board up windows and doors with 5/8 inch plywood.
- Bring outside items in if they could be picked up by the wind.
- Clear gutters of debris.
- Reinforce the garage door.
- Turn the refrigerator to its coldest setting in case power goes off. Use a cooler to keep from opening the doors on the freezer or refrigerator.
-Fill a bathtub with water.
- Get full tank of gas in one car.
- Go over the evacuation plan with the family, and learn alternate routes to safety.
- Learn the location of the nearest shelter or nearest pet-friendly shelter.
- Put an ax in your attic in case of severe flooding.
- Evacuate if ordered and stick to marked evacuation routes, if possible.
- Store important documents -- passports, Social Security cards, birth certificates, deeds -- in a watertight container.
- Have a current inventory of household property.
- Leave a note to say where you are going.
- Unplug small appliances and electronics before you leave.
- If possible, turn off the electricity, gas and water for residence.

State-by-state plans for Sandy landfall

People tend to underestimate the risk of flooding, and while one out of every five natural disasters in the United States involves flooding, less than a fifth of U.S. homeowners have a flood insurance policy.  So while it may be too late for some people to get financial protection from Sandy, advice on flood insurance is something many Americans nationwide still need.

Floods are one of the most common hazards in the United States, according to the Federal Emergency Management Agency (FEMA), but not all floods are alike. From South Carolina up to Maine, people are being warned to prepare, and understanding what’s coming and how to protect yourself is the only way to keep the damage in your own life minimal.

Once the storm passes, assessing the damage can be a difficult and slow process. Understanding what your insurance policies cover is important. Wind damage is usually covered by your home insurance, according to Jeanne Salvatore, senior vice president of public affairs for the Insurance Information Institute. That includes any falling objects such as trees. Damage to your car is covered under comprehensive coverage as part of your auto insurance policy. And since Sandy has two storm fronts, any winter-related damage such as freezing is also usually covered under in your auto insurance policy.

Flood insurance only covers physical damage to your property and possessions that are caused directly by flooding. For example, damage from by a sewer backup only would be covered if the sewer backup was the direct result of a flood. If the backup was caused by anything else, it isn’t covered.

“One thing to keep in mind -- in areas where it has been designated a hurricane, hurricane force winds, there are also going to be separate deductibles for the wind," says Salvatore. "Those are generally expressed as a percentage. So it could be 2% to 5% of insured value of the home. It could be a very high deductible.”

But flood insurance deductibles can get complicated, since they can differ by company, as well as by state. “For example, in New York insurance companies set deductibles but they need to be approved by the state," says Salvatore. "In New York, the deductible even within the same company could vary, could be higher.”

Salvatore recommends homeowners find out these details now, "even though you can't change your insurance when a storm is brewing," she says.

HLN Money Expert Clark Howard says it’s so important for homeowners to get flood insurance. And fortunately, it isn’t too harmful to your wallet, thanks to a federal flood insurance program that’s subsidized at super-cheap rates by taxpayer dollars. The National Flood Insurance Program is available through FloodSmart.gov. Premiums are usually between $100 and $400 annually and the policy covers up to $250,000 of damage. The program offers renters a special version of flood insurance that’s also subsidized.

Flood insurance only can be purchased through an insurance agent; you can’t buy it directly from the federal government. The NFIP has an agent locator on its site to help you find one nearby. See what’s available in your area and if you qualify for an insurance premium discount, which can be up to 45% if you live in a high-risk area and up to 10% in moderate-to-low risk areas.

Signing up for a policy is easy and you can even pay your premium instantly using a credit card. One thing to remember; the coverage typically won’t kick in until 30 days after you purchase your policy. Clark says there’s no excuse for not buying flood insurance if you live in or adjacent to a floodplain. And if you want additional coverage, insurers won’t offer that to you unless you first have this separate coverage from the feds.

Check out FEMA's Map Center for flood information in your area.

Here are a couple of other tips when it comes to insurance and your home:

Homeowner’s insurance

Many people wonder if they should reduce coverage on their home if it’s worth less now than it was before the recession. Actually, it’s just the opposite. Clark says a lot of people wind up underinsured because the cost to rebuild is much greater now than the resale price of an average home. And if something were to happen, these homeowners would be stuck with a lot less coverage than they need. Unfortunately, this is exactly what happened to so many residents in Joplin, Missouri, when an EF-5 tornado ripped through the small town last year. All homeowners need to get their policy evaluated to make sure they’re getting the right amount of coverage. Don’t ever go too long without making sure the insurance on your home is up to date!

Renter's insurance

What’s worse than a homeowner who’s underinsured? A renter who’s uninsured. Imagine your home being destroyed, along with everything in it, and not having one thing covered by insurance. Renters can avoid that situation for a pretty small price.

Renter’s insurance typically costs about $15 per month. In the case of a disaster, this coverage will pay for your possessions and, possibly, temporary housing. Even in the case of flood insurance, renters have a special option available to them for pretty cheap.

Document your belongings on video

Documenting your possessions with a video camera is a great way to prove to the insurance company, and anyone else, what was inside your home. Clark recommends doing a walk-and-talk through your home, stating the value of your belongings and the store where you bought them, in order to keep a precise record of everything that may need to be replaced someday.

Then keep whatever media you recorded that on in a fireproof safe at home or in a safe place off-site. Also make copies of all important financial papers like annual statements and store them outside of the home, either with a trusted friend or family member, or in a safe at the bank.

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