In peak hurricane season, do you know the home insurance myths vs. reality?
There's no telling whether the rest of this hurricane season will bring anything like Superstorm Sandy, which flooded more than 150,000 homes, killed more than 140 people, and left about 8.5 million homes in 20 states without power. But forecasters warn in no uncertain terms that a quiet start to the season is no reason for complacency. This is peak hurricane season. Sandy didn't hit till late October of last year.
And even a relatively minor storm can cause major damage if it includes high winds, heavy rain, or tree-snapping ice or snow. (This article is excerpted from a comprehensive report on disaster preparedness. Click here to read the full report on ConsumerReports.org.)
Based on the ad slogans, you'd think home insurers were everything from good neighbors to lifelong friends sworn to be "on your side" come hell or high water. But of the more than 8,000 Consumer Reports subscribers we surveyed who endured Superstorm Sandy, just 54 percent of those who filed claims were highly satisfied with how they were handled -- hardly a notch above the 51 percent who told us that after Hurricane Katrina.
Knowing what is—and isn't—covered before the next big storm can help you make sure you aren't stuck for the bulk of any repairs. Here are some of the most common home-insurance myths, and steps that can help put you in good hands:
Myth: A standard home-insurance policy includes disaster coverage.
Reality: Coverage for floods, hurricanes, and earthquakes usually costs extra, assuming you can get it. Flood damage was the most frequent problem cited by our Superstorm Sandy survey respondents, yet 30 percent lacked that coverage. And most who had it didn't have enough.
What to do: Ask to see any policy exclusions or limits in writing now. Then consider adding separate coverage for some or all of the risks your policy excludes before the next major storm. Premiums average $600 per year for flood insurance alone. Expect a hefty deductible for, say, earthquakes in a high-risk area such as San Diego, where the amount for a $317,000 house can come to $31,700.
Myth: I'll get my home's current market value if it's destroyed.
Reality: Most homeowners who suffer catastrophe are underinsured, according to United Policyholders, a San Francisco nonprofit that has surveyed and assisted disaster survivors nationwide since 1991. It's up to you to boost coverage as needed to be sure you get what your home is really worth, especially when home prices are rising, because insurers compete on lower premium prices.
What to do: Ask your insurer for a customized estimate of your home's replacement cost. You can also run your own check for $8 at accucoverage.com. Then consider checking other insurers to see which offers the most coverage for the lowest monthly premium. And consider buying an extended-coverage rider, which compensates for the surges in material and labor costs that often follow a serious storm.
[Need to upgrade your home insurance? Click to compare policies from insurers now.]
Myth: I can expect a quick and friendly payout like the kind in the commercials.
Reality: Be prepared for a fight, especially with large claims. Fully 20 percent of home claims were still pending for homeowners we surveyed six months after Sandy—with almost 50 percent of them for $40,000 or more. You'll also need plenty of documentation, including details such as cost, purchase dates, and serial numbers for appliances, furniture, and other items.
What to do: Get the Insurance Information Institute's free Know Your Stuff home inventory software or mobile apps. We also suggest getting your own contractor estimates for repairs. Another option is a public adjuster, who usually charges 10 percent of the payout but could get you far more. Find one at napia.com, the website of the National Association of Public Insurance Adjusters. Still having problems? Try griping to your state's insurance commissioner—or threatening to. Half of complaints to insurance commissioners through June of this year have related to delayed, denied, or otherwise unsatisfactory settlements.
Myth: My neighbor's insurer pays if his tree falls on my house or car.
Reality: Your neighbor's policy pays for damage to your home only if the tree was obviously rotted or dead before it fell, making it a neglected hazard. Otherwise, your homeowners policy covers your home and your auto policy covers your car, whether the tree was yours or your neighbor's. Expect to foot most or all of the bill to remove the tree if it's yours and it simply blew over without hitting anything.
[Make sure you're covered before the storm hits. Shop home insurance policies now.]
What to do: Keep a watchful eye on your neighbor's trees. Send a friendly e-mail if any look sick or damaged so that you can document the problem for later if necessary. Also have trees on your property inspected at least yearly by an arborist.
Myth: My landlord's policy covers me if I'm a renter.
Reality: No dice. A landlord's insurance policy covers only the landlord's building and personal liability, not yours.
What to do: Buy renters insurance to protect your possessions and cover the extra expense of temporary housing if your home is uninhabitable, along with potential injury and other personal-liability costs.
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