If you're among the potentially millions of East Coast residents who suffered property damage from Hurricane Irene, you need to prepare for a second storm -- the insurance claims process. The advice should sound familiar: You need to hope for the best but prepare for the worst.
Insurance companies have a well-deserved, horrible reputation for dealing with hurricane claims, and any thinking person understands that these for-profit companies don't make money by making things easy for victims. But before you let your outrage get the better of you, consider this: Hurricane Katrina victims received more than $40 billion in insurance payouts, according to the Insurance Institute of America. So they are paying claims, and plenty of them. Your job is not to get angry; it’s to get your fair share as soon as possible.
Hope for the best: Be courteous, be patient, make your case like an adult. But plan for the worst: Know that there have already been a remarkable 10 major weather disasters in the U.S. this year that caused $2 billion or more in damage, and there’s an estimated $7 billion in damage from Irene, according to Kinetic Analysis Corp. Insurance firms don't have money to give away; you have to fight for yours. Here's how:
When there's standing water throughout your ground floor, a hole in your roof or your car has floated away, carefully compiling paperwork can seem like a triviality. It's not. What victims do in the first few hours after a hurricane can make the difference between a smooth claims process and a red tape nightmare. It's hard to do, but try to set aside the extreme emotions of the moment and think like a lawyer for a few minutes -- what kind of photographs, documents or receipts would you need to build a case if your claim is denied six months from now?
And if you are the friend or relative of a victim, and wondering what you can do to help, playing the role of their accountant/lawyer as they work through the initial crisis is probably the best aid you can offer.
As soon as is practical, take pictures of the damage. Try to do this before you attempt any repairs. Use the best-quality camera you can find -- more pixels now will mean better printouts later -- but if all you have is a cell phone, use it. And there’s no such thing as taking too many pictures from too many angles.
Call your insurance company as soon as possible and get a claim number. These firms often operate on a first-in, first-out basis, so you want to get in line as soon as possible. You can call to establish a claim even before you've assessed all the damage.
Keep track of all the expenses you incur during the first few days of dealing with your damage -- keep hotel receipts, a mileage log, and track payouts for tree and debris removal. Many of these expenses can be reimbursed under homeowners insurance, and it will be hard to re-create your costs at a later date.
Typical homeowners insurance does not cover damage from floods. For hurricane victims, that means wind damage is covered, but most water damage is not. Separate flood insurance administered by the National Flood Insurance Program does cover flood damage, but many homeowners skip this supplemental coverage.
This wind/water distinction is old hat to hurricane-seasoned folks in Florida, but it might be new to folks in upstate New York or Vermont. It will also be the trickiest part of the recovery from Irene, which was much more of a rain and flooding event than a wind event. Making matters worse, many residents hit badly by Irene live in places where homeowners rarely consider hurricanes or floods. In May, WinzerInsurance.com reported that only 17 percent of Vermont residents in established high-hazard flood zones held flood policies. The percentage in other parts of the state is undoubtedly even lower.
With so many basements flooded up and down the Eastern Seaboard, it's also important to know that flood insurance treats basement damage differently than damage in other parts of the house. While structural damage is covered, basement upgrades -- finished walls and floors, for example -- are not
For more details, here's a great primer on what typically is and isn't covered by the so-called H-03, the basic homeowners policy.
Automobiles damaged by floods are covered, subject to deductibles, provided the owner has elected to pay for what's called "comprehensive" coverage. Roughly two-thirds of drivers pay for comprehensive coverage, according to a recent survey by AAA.
It's important to take full advantage of the insurance you've purchased. Many policies now include free rental car reimbursement, for example. And those who've purchased gap coverage won't have to make additional loan payments, even if the totaled value of the car is less than the outstanding loan.
When speaking with insurance companies, it's important to remember that words matter. Here's one kabuki dance that often occurs after hurricanes: flood damage to a kitchen will not be covered by a normal homeowner policy. But water damage to an upstairs bedroom might be covered if the roof of the house was damaged, leading directly to rain leaks into the room. Water damage caused by busted plumbing inside the house is covered; damage from water seeping into the house through the foundation is not.
A great primer on the lingo of insurance adjusters can be found here. It answers critical questions, such as: What is a basement?
If you are worried that insurance might not cover your damage, you'll have trouble finding help from other sources. The federal government, which is still assessing the damage, has not approved any individual aid so far; at the moment, only state and local governments will be getting FEMA funds. So-called "individual assistance" programs could be approved after President Obama approves governors' applications for major disaster declarations, but don't count on it, given budget constraints and the politcal environment.
One often overlooked source of help for both home and business owners are low-cost Small Business Administration loans, which are made available to residents of official disaster areas. Michael Lampton, spokesman for the U.S. Small Business Administration, said he expected such a declaration soon. Loans for homeowners will probably come with a rate of 2.5 percent, and business owners will pay 4 percent.
"It's definitely a good source for people impacted by hurricanes," Lampton said.
But of course, these are loans that must be repaid -- and that's a bitter pill for victims to swallow after already suffering Irene's wrath.
One important note: Insurance is designed to help people recover from catastrophes, not to erase every single hint of life’s unexpected problems. If the damage to your home is minimal, or even moderate, you should consider paying for it out of your own pocket. Claims will cost you in higher premiums. They'll cost future homeowners, too, and may make it harder for you to sell the house someday, as all claims are now stored forever in a massive insurance database called CLUE -- Comprehensive Loss Underwriting Exchange -- kind of like a credit report for your property. (In fact, it's always fun to see what's in your CLUE report already, which you can do for free at this Web site.) If your CLUE report becomes overcrowded with claims, you or a prospective buyer might be unable to obtain homeowners insurance for the property.
You might even want to discuss claim choices with neighbors, as insurance firms consider the claims history of homes in your neighborhood when setting premiums.
Finally, if you were lucky enough to avoid property damage this time around, now is a good time to count your blessings and double-check your home and auto insurance coverages.
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