Do You Really Need Disaster Insurance?

Do you really need disaster insurance?

The question, which is often asked by those who are considering purchasing this type of policy in the wake of Hurricane Sandy, came to mind after I read an article about a man who had purchased a hurricane insurance policy just days before the storm hit and lost everything. He had purchased coverage through his homeowners’ association, and from the moment it went into effect he was assured that his home would be protected – without interruption.

But the man, who is from a small town in northern New Jersey, told reporters that he learned about the limitations of the policy only after the storm. When he tried to file a claim, he found out that his home was not covered by the policy.

“I feel like I was lied to and cheated,” said Edward Beckwith, of West Milford. “I wasn’t told anything about what I have to go through to get any kind of reimbursement.”

Here is what Mr. Beckwith says he was told by New Jersey Federal Insurance, the company that issued his hurricane policy: “If a person is burglarized and there is less than $2,000 in coverage at the time of loss, that person can file with their homeowner’s insurance.”

Mr. Beckwith said he never had a problem with his homeowners’ insurance because his home was burglarized twice, once about a month before the hurricane and again in early December. It also sustained damage from flooding during Hurricane Irene in 2011. But when asked if Mr. Beckwith’s situation was an isolated one, Ms. Glickman, a vice president at New Jersey Federal Insurance, said her company does not get many complaints about its hurricane policy.

I asked Ms. Glickman if there is any limit to the amount of coverage the industry can sell, and she told me that the size of policy offered is one of the ways it works to help protect homeowners against loss from storms, floods and other perils.

“It is fairly common that we have people with more than $2,000 in coverage because they purchased higher limits to get more protection against a loss or they chose additional coverage to meet their needs for disaster preparedness,” she said. “Unfortunately, that can sometimes lead individuals to not realize that they may have other policies that come with higher limits as well.”

If you have a different type of policy or coverage, Ms. Glickman said, it won’t be affected by the hurricane policy you have through your homeowners’ association.

So if you own a home in a community with an HOA and your storm insurance is not sufficient to cover your losses after Hurricane Sandy, Ms. Glickman said you should contact your HOA and document the loss before filing for reimbursement from the company that issued the coverage.

But she said homeowners should also contact an insurance agent to discuss the best way to handle the situation.

“In this case, our client had two policies, one with his HOA and a renter’s policy from a third party, which was not sufficient to cover all of his losses,” Ms. Glickman said. “So he did receive some form of compensation under that renter’s policy, but in regards to the HOA policy we are still working with him on the details of that claim. If you do have coverage under both policies and you have claims that need to be combined it is always best for homeowners to take their lead from their insurance agent or company.”

In the meantime, another New Jersey family is still looking for answers after Hurricane Sandy. And their insurer has been non-responsive to requests for information from reporters, so some of the issues that Mr. Beckwith dealt with have yet to be addressed.

The woman who lives in Stillwater, N.Y., whose name I have withheld because she fears coming forward could affect her ability to make her claims, told me that she and her husband lost their home and many of their possessions. The storm destroyed 80 percent of the first floor of their house and caused extensive damage to the second floor as well.

The couple also moved out of their home after a pipe broke, causing extensive mold. Now they are living in a trailer outside the house with their two children and no income.

“We need help,” she said. “It has been four months since the storm and we have yet to receive any assistance from our insurer, Lloyd’s of London. We have called Lloyd’s every day and sent them copies of everything we have, including emails and computer printouts about my claim.”

But, she said the claims adjuster told her that she needed to document the destruction at her home and provide receipts. The woman understands what the adjuster wants, but she says it is impossible for her to do.

“We have no home,” she said. “Everything was in boxes when we moved out because we did not think we would be living there again for six months to a year. And our insurer won’t tell us how long this will take.”

She also told me that they don’t have a computer or an email account because they cannot afford it with their small income.

“I have asked Lloyd’s to send a representative to take pictures at our home, but they told me no – it is going to be a lot harder for you when you do not have the proof,” she said. “This is causing us unnecessary stress. We only want what is due to us – not more. They keep asking for receipts but I don’t have any receipts because I didn’t know that I would need them until now. But this does not seem to matter to Lloyd’s or their adjuster. All they care about is making sure they can say no and then move on without providing answers or assistance.

Conclusion

Lloyd’s of London, which is a multinational insurance corporation based in the United Kingdom, is the world’s largest catastrophe insurer. The company was reported to have paid out $1.5 billion to individuals and businesses for disaster claims in the wake of Hurricane Sandy.

Ms. Glickman said my description of her company’s hurricane policy was not accurate because it does not have limitations that would prevent it from providing more coverage than its policyholders are required by the HOA. But she did acknowledge that her company has had complaints about its storm coverage, but said those complaints have been rare and they have been corrected.