Homeowners Insurance: Lessons from Katrina and other gulf storms

When Hurricane Katrina hit the United States in 2005, it caused massive destruction and over $105 billion in damages. Hitting Florida, Louisiana and Alabama in particular, it is estimated to have been the most devastating storm to strike the region since Andrew in 1992. With a long-term death toll of almost 2200 people - including many who died due to lack of health services as a result of rising flood waters - Katrina was one of North America's deadliest storms ever.

With that brutal lesson behind us, let’s consider what homeowners insurance can do for you when you need it most: during an emergency evacuation or natural disaster.

When a natural disaster of this magnitude hits, your house can sustain serious damage. And for many people, the damage is often greater than the limit in their insurance policy.

So what do you do when you’re in this kind of situation? Do you have enough coverage? What about other assets like your vehicles and your belongings? Can those be covered as well? The answers depend on where you live, how much coverage you have, and whether or not you have sufficient safety measures in place to keep the damage to a minimum.

Let’s take a closer look at what homeowners insurance covers and how to make the most of it when things go wrong.

INSURING YOUR HOME

Homeowners insurance is a kind of property insurance that protects the house you live in, as well as any other building or structure on your property. This type of insurance covers damage from accidents, fire, theft, hail and three specific perils: water damage from leaks or floods and damage from windstorms (such as hurricanes or tornadoes) and volcanic action.

It's important to note here that homeowners insurance does not replace all the other types of coverage you may need - for example, if your belongings are stolen or lost in a fire, you’ll need to buy a separate policy for that. But it does provide some protection for certain things like clothing and personal documents.

In the case of a natural disaster, homeowners insurance does cover some damage from windstorms and floods, as well as damage from other types of perils (but not volcanoes or earthquakes).

What else does the insurance cover?

Depending on where you live, homeowners insurance is often expensive. But there are ways it can be used to make your home more secure - and more valuable once the danger is over. Here are some tips:

File a report with your local police station. This is an easy way to increase the value of your home. If you file a report that says your house was damaged by a tornado or fire or because someone broke into it, that could be worth hundreds of dollars to your insurer.

Secure your home. If you live in a hurricane or tornado zone, it’s important to make sure that your home is protected against damage from roof damage and wind. Having a well thought-out plan will help you keep your losses to a minimum. Make sure that vehicles and gardening equipment are safely stored away and that the water supply is kept safe in case of fire.

Secure your home from the inside out – screening in windows, putting in storm shutters, and installing storm doors are all ways to prevent water or wind damage during storms.

Keep it up-to-date with an annual checkup of your property and its contents. Inspections can help you spot problems and hold the insurer accountable for problems that arise.

The most effective insurance products available today are also the most expensive. But there are some premiums that are relatively affordable, even when you're living in an area that is prone to extreme weather events. And if you have good flood and wind cover, it's important to be sure you know how much it will cost to rebuild your property before a disaster happens.

As long as your home doesn’t have too many valuables or many people living in it, some homeowners policies should cover the full value of your home after a natural disaster. But if you’re in a vulnerable flood zone or have high levels of wind exposure, it’s important to be cautious and make sure you’re not paying too much for your coverage.

ESSENTIAL CONSIDERATIONS FOR YOUR HOMESURANCE POLICY

It's important to remember that homeowners insurance only covers damage from one kind of peril (in this case, perils such as hurricanes, tornadoes or earthquakes) per policy, so be sure to check what's included beforehand. But at the very least, a basic policy should cover any unexpected loss caused by fire or vandalism.

Homeowners insurance only covers damage to your home, so policies are designed to give you replacement value for the cost of rebuilding or replacing what's been damaged.

But the policy won’t cover things that you don't own. For example, if your car is damaged by a flood, that's not covered. This is also true for your possessions in the house - if you leave them behind and they're damaged, they won't be covered by your homeowners insurance. If you have valuable items like jewelry or fine art, it’s best to check with your insurer and see if these things can be covered under a separate policy (for an extra premium).

It’s also important to remember that your policy may cover your belongings only up to a certain limit, which is typically $2,000. This is especially important to remember if you keep more valuable items in your home.

What else are you covered for? Many homeowners insurance policies will cover added living expenses (such as hotel costs) if an extreme weather event prevents you from living in your home. These perks can be very useful, but they do carry an extra charge on the premium. Many insurers sell policies that allow for reimbursement of emergency services (like fire or ambulance services) and medical expenses.

Finally, it’s important to remember that your homeowners policy will also cover damage from sewer backup if the cause is not a flood. Deductibles can vary widely - they could be $1,000 or more for just a single claim on your property. If you think this is likely, it’s important to decide how much you would be willing to pay up front and discuss options with your insurer.

Bottom line: like all insurance policies, homeowners insurance should be designed to work for you rather than the other way around. If you want the most out of your policy, it’s important to know what it covers and how much you should expect it to cover before disaster strikes.

Conclusion

We hope that our guide has helped you learn what’s covered in your homeowners insurance policy and how much it will really cost to cover your home. As we’ve shown, homeowners insurance increases in value as you spend more on the policy, but this will depend on where you live.

Most companies offer a free consultation for their policies - so be sure to ask about this first and make sure you know exactly what is included in the contract. While some general homeowners policies do cover things like flood and wind damage, we recommend checking with your insurer so you know exactly what’s covered.