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What You Should Know About Your Home Insurance Before a Disaster

Make sure you and your loved ones are financially well-protected.

Next time you hop on a plane for a long flight, here’s a great read to take along with you:

Your homeowners insurance policy.

OK, it might not be as exciting as a novel by your favorite author, but reading it could save you hundreds — even thousands — of dollars in the future.

We’re talking about the costs you could incur from injuries or damage in a natural disaster, such as a hurricane, tornado, flood, wildfire or earthquake.

Do you have adequate insurance protection from such events?

It’s important to find out, because disasters will occur. And reading your documents after the disaster is a poor strategy. Many Texas and Florida residents who fled hurricanes Harvey and Irma discovered after they returned to their homes that their homeowners insurance contracts will pay for damage caused by wind, fire, lightning, hail and fallen trees — but not for damage from flooding.

For flood coverage, you generally need to buy a separate policy from the National Flood Insurance Program, administered by the Federal Emergency Management Agency.

And remember this: Flood insurance policies don’t pay claims for damage that occurs within 30 days of buying the policy. So don’t wait for a storm to approach to buy your policy. Get it now.

If you’re a renter, the landlord’s insurance doesn’t cover your possessions, so buy renters insurance.

Earthquake insurance

Standard home insurance or renters insurance won’t protect against earthquake damage, but a separate earthquake policy can fill the gap.

You might be tempted to skip this coverage unless you live in California, which has the nation’s highest risk of quakes. But quakes happen in other parts of the country too, such as the one centered in Virginia that damaged the Washington Monument in 2011 and another large one that same year in Oklahoma. Quakes can happen in just about every state.

Industry groups say half the losses from the Virginia quake were uninsured, and few of those who suffered losses in Oklahoma had coverage. (Oklahoma is one of six states the U.S. Geological Survey has identified as being at high risk for earthquakes caused by human activities, such as oil and gas fracking.)

Even in California, fewer than 10 percent of homes carry earthquake insurance, according to the California Earthquake Authority.

Earthquake insurance premiums could exceed the cost of your homeowners policy in high-risk regions. Annual coverage in California costs about $1.75 per $1,000 of coverage, while premiums in lower-risk states can cost as little as 50 cents per $1,000.

Inventory your possessions

When you file a homeowners insurance claim, you’ll need to submit a list of items that were lost, stolen or damaged. Having that list at your fingertips will ease the process and get your claim settled faster, so it’s wise to keep a current inventory of all your valuables. (Home inventory software available online can make this task easier.)

If you haven’t done so in the past, start keeping receipts now — especially for any big-ticket items.

Take and then print photographs of everything, and write descriptions and dates on the backs of the photos, or — better yet — make a video, narrating as you move along, getting close-up shots as well as far-away views.

When describing items, include the brand and model, condition, purchase price, replacement cost, current value, serial number, and date and location of purchases.

Read your policy to learn if big-ticket items will be adequately covered. You might need to insure certain items, like expensive jewelry, separately.

Keep your inventory list in at least two places outside your home — such as in a safe, at a friend’s or family member’s home, or in your email.

Mortgage and taxes

Even if your house is uninhabitable or was destroyed, as difficult as it may be, you must keep paying the mortgage and property taxes. Inform your mortgage holder of the damage. Remember, the lender has a financial interest in seeing that the house is rebuilt. Some lenders require two signatures on checks and may require insurance payments to be placed in an escrow account. They might issue payments to contractors after work is completed in stages and passes inspection to guard against fraud.

Don’t wait for the next natural disaster. Protect your property now with the right kinds and amounts of insurance.

And be sure to read your insurance policies to make sure you fully understand what’s in them.

We routinely advise our clients on the types and amounts of insurance they need and help them obtain it at competitive rates. That’s part of the complete financial planning services we provide. If your family members or friends have insurance needs or questions, we’d be happy to help them too.

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