Mellody Hobson: Storm Insurance for Homes

With hurricane season under way, it might be a good time to revisit your homeowners insurance policy, regardless of where you live. The biggest myth associated with homeowners insurance is that you are automatically covered in the event a catastrophe strikes your home. This, however, is more fiction that fact.

According to This Old House, there are more than 900 U.S. insurance companies that offer standard policies covering your house and its contents. Recently, Florida Gov. Jeb Bush signed into law several storm-related bills that make it easier for consumers to understand what their policies cover in the event of a hurricane. However, many homeowners remain in the dark about what type of coverage they need to protect one their biggest investments -- their home.

Is there such thing as hurricane insurance?

Yes. You can endorse your homeowners policy to include hurricane coverage. In states like Florida, a policy holder may have to pay a separate deductible (usually less than $500) for hurricane-related damage.

Is it too late to get insurance for the coming storm?

Yes. Most insurance companies will not issue new homeowners coverage once an area has been placed under a hurricane watch or warning by the National Weather Service. Additionally, the moratorium remains in effect for 48 hours after the watch/warning has lifted. The same holds true for flood insurance issued through the National Flood Insurance Program. This type of coverage has a five-day waiting period.

What if multiple hurricanes hit -- are you covered?

Yes. You are covered in the case of multiple disasters. Typically, each occurrence will trigger a new deductible. Four major hurricanes hit Florida in 2004, resulting in more than 36,000 Florida homeowners having to pay more than one deductible, according to the Florida Insurance Council.

Are you automatically covered in the case of a natural disaster?

Besides asking your agent the obvious -- how much coverage you have and how the claim process is handled -- it is important to find out what is not included in your policy. More often than not, the most likely catastrophes are not covered under a standard policy.

For example, a standard policy does not cover a homeowner in case of a flood, and flooding is the most common type of natural disaster. And do not be fooled into thinking that if you do not live near a body of water, you are not at risk. According to the Federal Emergency Management Agency, 25 percent of flood claims occur in the low-to-moderate risk areas. If you determine that you need flood insurance, you can obtain coverage from NFIP, which works with approximately 90 different insurance carriers to sell and administer policies.

Because these policies are offered by the government, prices are consistent from carrier to carrier, but they do vary depending on the proximity of your home to a flood plain as well as the amount of coverage you will need. For example, if your home is close to the ocean, flood insurance will cost between $1,000 and $3,000 annually. For more information about insurance carriers in your area, you can call 800-427-4661 or visit the FEMA Web site at www.fema.gov.

Will your insurance rates go up after a hurricane hits?

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