Mellody Hobson: Storm Insurance for Homes

No. Homeowners rates usually do not go up after a hurricane. Rates are based on property insurance payments within a region over several years, in addition to an amount held in reserve for a hurricane or other catastrophic event. Rates usually will be increased only after a series of large catastrophic losses. Despite the record number of storms last year, the average cost for homeowners insurance in 2005 is up $17 from 2004 and is estimated at $677, according to the Insurance Information Institute.

What should you do to best prepare for future disasters?

The most important step you should take is to get home insurance coverage commensurate with your needs. The rule of thumb on deciding how much homeowners insurance you need is based on the following four questions:

      How much would it cost you to rebuild your home at current construction costs?

    The easiest way to calculate this is to multiply the total square footage of your home by the local building cost. Your insurance agent will be able to tell you approximate building costs in your neighborhood.

      What are your personal possessions worth?

    The typical policy covers about 50 percent to 70 percent of a typical homeowners' personal possessions. To determine if your coverage is sufficient, conduct a very thorough inventory of your home and personal items to determine the value of your goods. It is a good idea to do this with a camcorder and to make a detailed journal of all your items. Additionally, do not store the video or log in your home -- put them both in a safety deposit box.

      How much is it going to cost you if you have to move out of your home in the case of a disaster?

    Work with your agent to ensure that you and your family would have enough coverage for temporary living expenses (such as hotel room, meals, other expenses) which you would incur in the event you could not live in your home.

      What will your liability be to others?

    In case something happens to someone who is on your property, you are liable for their personal damages. A typical policy provides a minimum of $100,000 worth of liability. Again, this is individually driven preference, so work with your agent on coming up with an amount you believe will offer enough protection.

Do you understand the loss/recovery provisions in your policy?

It is important to select a policy that offers guaranteed replacement cost coverage and not actual cash value. For example, if your five-year-old mattress is destroyed, instead of being reimbursed for the cost of a new mattress, you would be given an amount corresponding to its depreciated value.

However, with guaranteed replacement coverage, the insurance will pay the full cost of the item at current cost. If your policy does not specifically state that you have replacement value coverage, you will only receive the cash value for your destroyed possessions.

Mellody Hobson, president of Ariel Capital Management ( in Chicago, is Good Morning America's personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributed to this report.

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