Beware Hurricane Irene, Beware Insurance Troubles in the Wake

In the wake of disasters, some survivors battle to get their homes restored.

Aug. 26, 2011 — -- As Americans up and down the eastern seaboard are boarding up windows and hoarding supplies ahead of Hurricane Irene's impending wrath, those who will be hit the hardest may not have considered the storm could be just the beginning of their troubles.

Historically, hurricanes in the U.S. -- like Isabel in 2003 and Katrina in 2005 -- have left homes destroyed and some residents in long, bitter battles with everyone from opportunistic small-time scammers to the federal government to get their lives back to normal.

Today the Consumer Federation of America announced it expects "several hundred thousand" insurance claims to be made in Irene's wake, likely exceeding $6 billion in payouts. To make sure you get what you deserve out of your policy, insurance experts told ABC News what homeowners can do to best protect themselves and their homes when it comes to insurance. Check out their advice below.

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Before the Hurricane: Policing Your Policy

Know Your Policy The most common problem homeowners run into, according to Ed Rogan of the New Jersey Department of Banking and Insurance, is not knowing exactly what their policy covers.

"Most people don't realize that their standard homeowners policy does not cover flood insurance," Rogan said. Instead, people must join the federal government's National Flood Insurance Program under a separate policy which can be purchased through their local insurance agent after a 30-day waiting period -- too late for anyone who doesn't have it already.

When a hurricane hits, damage is divided into two categories: wind damage and flood damage. Basic homeowners' insurance protects against wind damage, but only the federal program protects against flood damage.

Keep Your Policy Safe. If you're evacuating ahead of the hurricane, keep a copy of your insurance policy with you "so that you can refer to it after the storm, if needed," the Consumer Federation of America said in a statement.

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Inventory Your Possessions. Before you evacuate, make an inventory -- or even take pictures -- of your home, inside and out.

"The more detail you include, the easier it will be for your insurance company to evaluate your loss," the National Association of Insurance Commissioners said in a consumer alert. "Once you have made your inventory... email the information to family or friends living out of the hurricane threat or to your insurance agent."

The National Association of Insurance Commissioners even offers a free smartphone application, myHome, to help your inventory on the website

After the Hurricane: Making -- and Defending -- Your Claim

Take More Pictures, File Your Claim Quickly. Once you return to your home, be sure that one of the first things you do is take pictures of all the damage and keep a record. Like the "before" pictures, having photographic proof of your damage helps the insurance company evaluate your claim. Also, the CFA said most insurance companies work on a first-come-first-serve basis, so the quicker you file a claim, the quicker you may be compensated.

Chronicle Your Interactions With the Insurance Company. The CFA said one of the smartest things homeowners can do when filing a claim is to be sure and document every interaction with the insurance company.

"You should immediately start a notebook documenting contacts with your insurance company," the CFA said. "List the date, time and a brief description of the exchange. If you need to complain later, this information will be vital."

Make Sure the Agent That Greets You Is Actually an Agent. While you're sifting through rubble, some unsavory characters could go as far as impersonating insurance agents in order to cheat you, according to Rogan and the CFA. If the agent is an independent adjuster hired by the insurance company, ask them what actual company the adjuster is working for and if they're authorized to make claims decisions and payments on behalf of your insurance company.

Rogan said homeowners can check with their state insurance departments to make sure anyone that claims to be an adjuster is licensed. More on fraud schemes later.

Watch How the Insurance Company Files. Since the same insurance agent may deal with your private as well as federal claims, there is a danger the adjuster will attribute more of the damage to flooding -- for which the federal government would have to pay -- than wind damage -- for which the private insurance company would have to pay.

In 2006, two State Farm employees came forward in an ABC News exclusive investigative report by Brian Ross to claim the insurance company buried reports on wind damage in favor of ones that emphasized flood damage in order to reduce the company's financial burden on payouts. A lawyer for State Farm denied the allegations at the time.

Still, the CFA said if consumers suspect the "potential abuse," they should contact their U.S. representatives and senators with the information.

Unhappy With Your Insurance Company's Response? "If the claim is denied or you feel the offer is too low, demand the company identify the language in your homeowners' policy that served as the basis for denying your claim or offering so little," the CFA said. The insurance company must defend its rational for giving you the payout it did.

If you still feel you've been wronged, Rogan said residents can take their case to their state's insurance department for review.

"We have a room full of people that do nothing but that," Rogan said of the New Jersey insurance department.

The CFA also recommends considering hiring an attorney, sharing the notes you took when dealing with the insurance company and potentially taking them to court.

"In addition to an award covering your claim, if your treatment was particularly bad, the courts in many states will allow additional compensation when the insurance company acted in 'bad faith,'" the CFA said.

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Beware Home Repair Fraudsters

When homeowners return to damaged homes and start picking up the pieces, often building contractors, plumbers and electricians will offer their services. But not all of these contractors are to be trusted and, according to the National Association of Insurance Commissioners, home repair fraud "increases exponentially following a major storm."

As the Virginia State Police said, "By taking a few simple precautions to guard against the fraudsters, cheaters and crooks who often show up ready to take advantage of someone else's misfortune, citizens can protect themselves."

Are They Licensed? One of the first questions you should ask a potential contractor is if they're licensed. All legitimate home repairers should be properly licensed with the state. You may be able to check for any complaints against the contractor at the Better Business Bureau website.

Get an Estimate, Talk to the Insurance Company. The NAIC said that after you shop around with a few potential contractors, make sure each gives you an estimate. Then take that estimate to your insurance company to make sure it will be covered before the hammering/plumbing/wiring starts. If they won't cover the full cost, negotiate with both the insurance company and contractor until you're satisfied -- just don't forget to keep writing everything down.

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