What You Need to Know About Insurance After a Natural Disaster.
Did you know that flood insurance and earthquake insurance are not included in any standard policies, not even with comprehensive coverage? You need to purchase those separately. You may not need those policies depending on where your business is located, or perhaps you have several business locations. Other natural disasters, including fire and hurricanes, may or may not be covered depending on the specific situation and the details of your policy. Odds are that one location or another will need to have one of those policies in place.
Natural disaster insurance policies may need to be purchased separately.
Read the fine print and ask your insurance agent specific questions so you are absolutely clear on what your policy covers - and what it doesn't.
What To Do First: Clarifying your coverage
Property insurance is usually divided into two types:
- Open Peril, which covers all possible perils within a general category, and
- Named Perils which covers only the specific perils chosen and named in the policy.
In other words, you may choose to have a comprehensive policy that covers your business on an "open perils" basis, which means nearly every possible situation is covered, or you may choose to designate certain perils that you choose to insure against. Named peril policies are typically more limited, but often cheaper, and may keep you from having to pay for insurance you don’t need. On the other hand, they don’t offer the full-on security of an open peril policy.
However, there are named disasters that are not included in Open Peril insurance policies, and must be named in order to be covered by your insurance. For example: if you want hail coverage on your property policy, purchasing an open perils policy will not cover it. Hail coverage isn't one of the many that are included under the umbrella of open peril policies. Therefore, you would have to purchase hail coverage on its own, either with a named policy or in addition to your open peril policy.
When aren't you covered? Situations may come up in which a natural disaster will not be covered, even if it is listed on your policy. This can happen when the insurance company reasonably believes that the damage could have been prevented by human action.
For example, you could park your car under a dead tree during a wind storm, and if your car
sustains damage from that tree, the insurance company may tell you that you could have prevented it and refuse to cover the damage.
If you believe you should have insurance coverage from a natural disaster, you can always choose to consult with a lawyer who will be well versed in the gray areas of insurance policies.
Many victims of a flood learn quickly that a standard homeowner's policy or a standard business insurance policy covers structural and water damage - and only in limited circumstances like a falling tree knocking a hole in a roof or a window, allowing rain to fall inside. Again, be aware of any limitations in your policy.
Reparations. Don't make permanent repairs until you have agreed on the cost of repairs with the insurance company. If you need to make temporary repairs to prevent further damage to your property, let the insurance company know that and meet with their adjuster, who can survey the damage. In some cases, this person is an employee of the insurance company; however, there are likely to be plenty of independent adjusters around if your situation is a declared disaster. To make a claim through FEMA, or check in with DisasterAssistance.gov as well.
If you have structural damage to your office or warehouse, here’s what you need to know to start the insurance claim and filing started.
Document, document, document. Notify your insurer as soon as possible after the disaster and keep the contact information handy. Fully document the damage for your insurer by taking photos or video. Digital versions are best because they can be stored electronically and easily copied/ transmitted. Advise your insurance rep that you intend to start repairing and rebuilding as soon as possible and determine whether or not to wait for an adjuster to inspect the property. Document the damage and conversations at every stage of the process.
Keep all insurance information handy when questions come up or you want to inquire about timing for your claim.
Insurance Company Tactics. Insurance companies are always trying to save money when
paying out claims. Remember that it is not legal for an insurance company to apply multiple deductibles (if you hold several policies) when there has only been one disaster. Other insurance companies may try to scare you into thinking that they are going to cancel your policy if you make a claim. Please note that they cannot cancel your policy if you report a natural disaster claim because you did not cause the natural disaster.
Responsibility for specific items. Some damages are typically covered by natural disaster insurance, and your insurance company should pay for them. Your insurer should pay for:
- Carpeting. If your carpeting was ruined by a covered event, such as a flood, your insurer should pay to replace the carpet, including the carpet pad and the installation.
- Asbestos. Many homes built before 1978 contain asbestos in the walls and ceilings, and asbestos can be a hazard if not properly removed or contained. Your insurer should pay for a qualified contractor to remove the asbestos.
- Mold. If insurance-product is discovered, you should present a claim for remediation and repair. If your home has an insurance-product problem, all of the fabric items in your home will have to be replaced and your insurer should pay for it.
- Painting. Your insurance company is responsible for all of the costs incurred in painting your home. That includes removing furniture, light fixtures and electrical outlets and then replacing them when the painting is finished.
- Repair of walls and insulation. If the walls and insulation are damaged by flood waters, your insurance company has to pay to replace them. That includes crown and base insurance-productings on the walls, in addition to drywall and the insulation behind the walls.
- Loss of power. If you lost power because of the natural disaster, you are entitled to payment for the food in your refrigerator. The insurer also has to pay for an electrician to inspect the wiring in your house.
- Additional living expenses. If you have to move out of your home during or after the disaster, your insurer should cover the additional living expenses you have to pay for while your home is being repaired, such as hotel charges or rent for a temporary home.
Furthermore, if your insurance company denies your claim, you can sue them for the amount that should have been paid on the claim, as well as your attorney fees and court costs.
Settling your claim. First of all, all settlement offers can be negotiated, so if the first written assessment of the damage is below what you submitted for damage, do not cash the check. This is another tactic used by many insurance companies because most people need the money and are eager to start repairs, and having a check in hand is very tempting. Be in it for the long haul and make sure you are getting everything you need. Review the full report and agree with all items and costs before accepting payment.
Adjusters need to account for regional differences for labor and material costs. If they don't, you can make a case for a higher amount. Look for the following red flags:
- Omissions of damaged items
- Partial or incomplete measurements
- Low-ball estimates of contractor costs
If you see a problem, return the first check and ask the adjuster revise the report; then request a check from the insurance company for the correct cost of the damage. You can talk to an insurance company's approved contractor to estimate your property damage, but remember that you do not need to use them.
Keep your documents, inventory of loss, conversation notes, receipts for related purchases, photos and anything else relevant to your claim in a safe place - the more specific, the better. You can also escalate any problems to your state insurance commissioner.
Factors that determine the settlement amount
- Replacement Cost and Actual Cash Value
- Replacement cost policies provide you with the dollar amount needed to replace a damaged item with one of similar kind and quality without deducting for depreciation (the decrease in value due to age, wear and tear, and other factors).
Actual cash value policies pay the amount needed to replace the item minus depreciation. If your washing machine is damaged, the replacement cost policy means the insurance company pays to replace the old machine with a new one. An actual cash value policy means the company pays only a part of the cost of a new washing machine because a machine that has been used for eight years is worth less than its original cost.
If you need to rebuild property, understand current building compliance codes. In areas likely to be hit by hurricanes, for example, buildings must be able to withstand high winds and if you are rebuilding, it will need to be built to current codes.
The use of public adjusters. Your insurance company provides an adjuster at no charge. There are also independent auditors that are not connected with any insurance company but they charge a fee and often a percentage of the settlement. If you go with an independent auditor, check their references, the Better Business Bureau, your state insurance department, and the National Association of Independent Insurance Adjusters.
For more information, check with the agencies listed below.