Charles Hagerty No Comments

The Special Risks of Hurricanes and Floods

The end of summer seems to be peak time for natural disasters. Often, Labor Day weekend newscasts include stories about a hurricane, flood, tornado or wildfire happening somewhere in the United States.

Those who are dealing with the crises created by natural disaster need more than news coverage—they need insurance coverage. There are significant risks presented by natural disasters, which not only threaten homes and businesses but also endanger the health and lives of people in their paths.

Nowhere is the value of insurance more apparent than with natural disasters. But consumers must make decisions on important issues in order to insure their homes and possessions from the financial risk of hurricanes and floods:

Hurricane deductibles. June through November is hurricane season in the United States. Many remember the disastrous 2005 hurricane season in the south, when insurance companies paid an estimated $41 billon for 1.7 million claims for damage to homes, businesses and vehicles in six states from Hurricane Katrina, according to the Insurance Information Institute. The Katrina disaster, combined with Hurricanes Rita, Wilma and Dennis, led to more than $57 billion of insured losses and 3.3 million insurance claims.

In recent years, insurance carriers have begun requiring homeowners to have a “hurricane deductible” where permitted by state insurance law. Designed to help insurers manage the significant financial risk they carry when paying thousands of claims in one geographic area, hurricane deductibles apply to damage solely from hurricanes.

Hurricane deductibles range from one to 5% of a home’s insured value. Coastal areas may be higher. The deductible is “triggered” based on the circumstances stated in the homeowners insurance policy language. For example, a 2% hurricane deductible for a home valued at $200,000 means that the homeowner would pay the first $4000 (2% x $200,000) of damage from a hurricane.

Like most insurance coverage, premiums are higher with a lower deductible. Policyholders may have the option of a traditional dollar deductible (such as $500 or $1000) in some states, although that’s not typically offered in higher-risk coastal areas.

Flood insurance. Flood damage is specifically excluded by homeowners and renters insurance policies. Flood insurance coverage, though, is available through independent insurance agents as a separate policy from the National Flood Insurance Program (NFIP), a federal insurance mechanism. In the 1960s, taxpayers often had to “bail out” flood victims, and Congress created the NFIP to make flood insurance available in communities that adopted floodplain management laws to reduce flood damage.

Today, NFIP insurance covers up to $250,000 for the structure of a residential property and $100,000 for contents. Premiums start at $348 for that coverage for a residential property and its  contents. Some insurance carriers offer additional flood insurance (called “excess coverage”) above the basic policy limits or for people whose communities do not participate in the NFIP.

In 2008, a survey by the Insurance Information Institute found that 17% of Americans have a flood insurance policy. The national flood program reported that the average flood claim amounts to $33,000.

Hurricane deductibles and flood insurance are two insurance decisions that consumers might want to double-check.

TLIG is a local Trusted Choice® agency that represents multiple insurance companies, so it offers you a variety of personal and business coverage choices and can customize an insurance plan to meet your specialized needs.

Visit us online at or call us at (434) 582-1444.



Charles Hagerty No Comments

When You Can’t Come Home: What Does “Loss of Use” Coverage Actually Cover?

Your homeowner’s insurance policy will pay to repair damage to your home caused by a fire, windstorm or other covered cause of loss. But when you and your family incur expenses for moving out while repairs are made, who picks up the tab?

An often-overlooked but essential function of your homeowner’s policy is “additional living expenses” (also called “loss of use” or “Part D”) coverage. Additional living expenses coverage will pay the necessary increase in living expenses required to maintain your family’s current standard of living while the house is being repaired. Examples of expenses typically covered include the cost of hotel, food bills in excess of normal grocery/restaurant bills, cooking supplies and the cost of moving property into storage.

The good news is that payment for these expenses usually does not stop if the policy expires. Rather, they will continue to pay until the limit is used up, the home is repaired to a habitable state, or you permanently relocate.

The bad news is that many homeowners erroneously believe that the policy covers 100 percent of additional living expenses until the home is habitable. Realistically, very few policies do this. In most cases, home insurance companies place a limit or cap on loss-of-use payments. For example, many homeowner policies will only offer loss-of-use coverage as a percentage of the limit of insurance carried on the dwelling; 20 percent is common. Others may specify a flat dollar amount.

Usually, a covered loss must occur for any insurance dollars to be paid for additional living expenses. The one exception is if your home is not accessible due to civil authority or government mandate triggered by nearby damage. For example, in 2009, wildfires in California triggered mandatory evacuations that prevented tens of thousands of homeowners from going home. If homes in close proximity to yours are burning, there’s a chance the government will close roads and/or prevent you from entering your property even though it has not yet suffered a direct loss. In this situation, additional living expense payments are often limited to two weeks.

Homeowners who receive additional income by renting a portion of their home should also pay close attention to the Part D limit. This limit also applies to replacing lost rental income while the damaged house is being repaired.

Here’s the important question: How do you know if your policy’s Part D limit is sufficient? The trouble is that important factors are variable. For example, how do you know how long you will be out of your house? Building codes and permits cause rebuilding efforts to proceed slowly in many parts of the country. Calling a local building contractor to gain some idea is a good start but there is no exact prediction.

Further, how do you know what expenses you will incur? According to’s 2009 hotel price index, the average hotel room in the U.S. costs $115 per night! Add this and other expenses to a lengthy, unpredictable repair schedule and the possibility of eclipsing your Part D policy limit before your home is habitable could become a serious problem.

The last thing you want to hear is that your loss-of-use coverage has run out before you can go home. Fortunately, a professional insurance agent understands these exposures and can help you weigh your options, including those that may increase your loss-of-use coverage limit.

TLIG is a local Trusted Choice® agency that represents multiple insurance companies, so it offers you a variety of personal and business coverage choices and can customize an insurance plan to meet your specialized needs.

Visit us online at or call us at (434) 582-1444.