Does Your Current Insurance Policy Protect You If a Hurricane Strikes?Posted on Jul 23, 2020
While hurricanes can occur any time of the year, the official hurricane season begins June 1 and ends November 30 each year. As we approach the peak of hurricane season, which occurs mid-August through the end of October, it’s important to ensure your insurance protection is adequate for your needs should a hurricane strike.
Here’s what you need to know about hurricanes and the types of insurance protection you’ll need to protect your home, family, and business.
Personal Insurance for Hurricane Protection
Your home is your castle. Hurricanes do not care if you own your home or rent. They deal out the damage in equal amounts to all parties. In other words, you need robust hurricane protection whether you rent your home or own it.
Types of Hurricane Damage
There are essentially two primary types of hurricane damage: 1) damage caused by wind and 2) damage caused by a flood. In order to have sufficient hurricane protection, you need to be sure that you’re protected by insurance that covers both types of damage.
1. Windstorm Hurricane Protection
The majority of insurance policies for homeowners and renters provide specific protection for windstorm damage. This includes most of the wind that comes directly from the hurricane itself as well as the occasional tornadoes spawned by these large tropical systems.
Some states do require homeowners to purchase an additional and specific “windstorm” protection to cover the damage hurricanes deliver. New Jersey, as a rule, does not require separate windstorm insurance protection. However, it’s best to check your specific policy, before hurricanes occur, to see if your home is sufficiently protected from windstorm damage.
2. Flood Hurricane Protection
Most homeowners and renters insurance policies specifically exclude flood damage from insurance protection. While some insurance providers do include flood insurance in renters policies, it’s the rare exception rather than the rule. This means you’ll likely need to purchase a separate policy for wind damage and flood damage.
There are two types of flood insurance available to New Jersey homeowners. You can get flood insurance through:
- The National Flood Insurance Program (NFIP): Many homeowners and some renters will find that the protection provided by the NFIP is insufficient to meet their needs. NFIP limitations for protection are quite stringent with the maximum protection for the structure of your home being $250,000 and the maximum protection for the contents of your home at $100,000. It doesn’t take long for these things to add up, and many homeowners and renters alike, quickly discover that their possessions are worth a good deal more than the $100,000 maximum allowed by the NFIP.
- Private insurers: With private flood insurance, you can obtain coverage above and beyond the limits of the NFIP. This means you can protect the full value of your home against floods, tidal surges, etc. The same goes for the items within your home. Not only can you protect general possessions from flood damage, but you can also purchase specific flood insurance protection for high-value items in your home that may be excluded or devalued under the NFIP.
One of the most important things to remember about flood insurance is that it doesn’t become active for 30 days once you purchase a policy except in certain situations, such as:
- You’ve just purchased your home with a mortgage
- You’ve refinanced your mortgage
Ultimately, it means you can’t wait until a storm is approaching to purchase flood insurance and have the protection your home requires. This is something you certainly need to plan ahead for – before hurricane season peaks, and you find yourself without this critical protection.
Also, note that flood insurance does not provide protection to cover alternative living arrangements while repairs are made to your home. While your homeowners policy may offer some protection during a hurricane, if you’re in a flood-only event, you may be left to cover your own arrangements during this trying time.
Personal Hurricane Insurance Considerations
As a homeowner or renter deciding on personal hurricane insurance, you also have a couple of considerations to take into account. These relate to deductibles and actual cash value versus replacement values.
Hurricane and Windstorm Deductibles
One thing many people find confusing about hurricane insurance protection is the existence of hurricane deductibles. These deductibles are in addition to traditional homeowners or renters insurance deductibles.
Where traditional deductibles, which you will still be required to pay, are usually specific dollar amounts, such as $1,000 to $5,000, hurricane deductibles, or windstorm deductibles (in some states) are typically a percentage, such as two to five percent of the home’s insured value.
New Jersey is one of the states that has specific hurricane deductibles in place if the storm in question meets specific criteria, but many other states do as well.
Actual Cash Value vs. Replacement Value
Another consideration when insuring personal possessions and property involves misunderstandings related to actual cash value vs. replacement value.
- Actual Cash Value, or ACV, protection includes a hefty penalty known as depreciation for the age of items. Many items lose value within months of purchase, and the insurance will subtract that value for items that were lost or destroyed in the flood instead of how much it will cost to replace the item. They will use a formulation based on the age of the item to determine what they will offer. It will be the actual cash value – depreciation = offer. This insurance coverage is less expensive, which is why many consumers purchase it. However, it does limit your ability to replace lost or damaged items after a hurricane.
- Replacement value protection provides you with the amount of money required to replace items that are lost and damaged during the storm. This insurance protection costs more and may require riders for high-value items you own. Many homeowners find it worthwhile to purchase replacement value insurance, though, as a means to avoid the losses associated with depreciation.
It’s important to understand the differences between the two so that you do not find yourself unable to replace things that are important to you that were lost during a hurricane.
Business Insurance for Hurricane Protection
Like homes, businesses face two primary types of damage when hurricanes occur. The most common are wind damage and flood damage.
Hurricane or Windstorm Insurance for Businesses
Your business property insurance may include coverage for hurricane or windstorm damage. But it may not. It’s important to find out before a hurricane strikes.
If you aren’t confident that you have the right type or amount of coverage, contact Otterstedt Insurance Agency, and we’ll help you determine the best type and amount of coverage for your specific business.
Flood Insurance for Businesses
Most business property insurance policies do not provide protection against floods for businesses. This means you’ll need a separate policy to provide coverage. The National Flood Insurance Program does offer flood insurance for businesses that some small business owners may wish to consider. Like home insurance, the NFIP is limited in the protection it provides businesses.
For instance, NFIP requires separate coverage for each building on your property. Maximum protection for buildings damaged in a flood is $500,000 per building covered. The maximum protection for business personal property is also $500,000. You will need to purchase each type of coverage for every building on your business property and are encouraged to do so.
Most NFIP policies provide protection for the actual cash value of the business’s personal property, which means all items, equipment, etc. is subject to depreciation. This is one reason many business owners prefer to seek private insurance protection for floods. It allows you to choose whether you want ACV protection or replacement cost coverage for your business personal property.
Business Interruption Insurance
Very few business insurance policies offer coverage for both flood and wind damage as part of their standard insurance coverage. Businesses have requirements that go above and beyond what the average homeowner needs, however, and often need the additional benefits provided by Business Interruption Coverage.
Some hurricanes come into a region and leave utter devastation behind. Not only are you left to pick up the pieces and make repairs, but you could face extended closures while repairing your business and replacing business inventory, fixtures, and other property.
Most small businesses cannot survive an extended period of closure. Business interruption coverage often kicks in after 72-hours (considered the deductible period). It helps replace much of your lost income while you are closed for repairs – allowing you to continue paying creditors, utilities, and possibly employee salaries.
For most businesses, this vital coverage is equal in importance for windstorm protection and flood insurance during hurricane season since it can take weeks or even months to reopen after a catastrophic storm.
Hurricane Insurance from Otterstedt Insurance Agency
Otterstedt Insurance Agency has been serving the needs of New Jersey homes and businesses for more than 100 years.
We’ve been by your side as big-named and devastating storms have blown through the region, offering our support and outstanding insurance protection along the way. Let us help you make sure you have the right amount and type of coverage for your home and business needs as you go into this hurricane season.
Call us today at 201-227-1800, and let us make sure you have the protection you require today.