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INSURANCE AND STORM PREPAREDNESS
When the threat of severe weather is on the horizon, everyone’s focus becomes preparedness. Homes and businesses are boarded up, generators are purchased, bottled water is snatched from store shelves. However, too few people examine their insurance policies or call their agent ahead of time to make sure they possess adequate coverage in the event a storm damages their home or possessions. Year after year, with storms like Irene and Sandy, people still get caught without coverage and end up paying a harsh price. One of the most tragically common misunderstandings related to storm damage is that homeowners insurance does not cover losses from flooding. A separate flood policy must be purchased instead. Do you know if you have flood insurance? It’s also important to be aware of the difference between standard homeowners policy deductibles and “hurricane deductibles.” Standard deductibles for covered losses are usually a flat dollar amount, such as $500 or $1,000, while hurricane deductibles are usually between 1 to 5 percent of a home’s insured value which could mean thousands more in recovery costs if the storm qualifies as a hurricane. In New York, there is no standard criteria for whether a storm qualifies as hurricane or not. Different insurers apply different standards to the deductibles in their policies. If you don’t know what your insurer’s standard is, contact us and we can review your policy. Some people assume that if the worst does occur there will be a financial safety net in the form of recovery aid from the Federal Emergency Management Agency. What is often overlooked is that this aid comes in the form of loans that must be repaid with interest. Furthermore, not everyone qualifies to receive it. When storm damages make it necessary to leave your home temporarily, your home owners policy will cover the additional costs necessary to maintain your normal standard of living for such things as meals, lodging, laundry, transportation, entertainment, etc. However, you must present receipts for all of your expenses to be reimbursed. There are many other wrinkles in insurance policies when dealing with storm damage and recovery, such as food spoilage, power loss and debris removal. The conditions are not always as clear as they may seem. Call your agent and go over your policy with expert eyes so you can know what you need, what to expect, how to best prepare.
Superstorm Sandy affected hundreds of thousands of people and caused billions of dollars in damages to personal property. As victims submit claims and receive payments from carriers, it’s important to consider the tax implications of your insurance policy’s proceeds. If damages are covered by insurance you may run into a scenario where you actually owe taxes. This occurs when the amount your policy pays out exceeds the tax basis of the damaged or destroyed property. Generally speaking, any taxable gain from the proceeds of an insurance policy must be reported unless the repair or replacement of your property reaches a certain cost, or you make a special tax election to defer the gain. If you decide to defer, then only the money left over after repairing and replacing your property will be taxable. Unfortunately, as more people submit their claims they are finding that some of their losses are not covered. If you have a loss that is not covered by insurance there is a small silver lining. Losses caused by a storm that are not covered by insurance can be written off on your federal income taxes as personal casualty losses. However, before you can make your deduction you will first have to do two things:
Taxes and insurance are both tricky. Contact your tax advisor if you have any questions.
Flooding and other disasters are not covered by a standard homeowners insurance policy. Your insurance agency can help you review your current homeowners, auto and other insurance policies to help make sure you have the coverage you need now to provide you with peace of mind later. Give us a call today. Some coverages, such as flood insurance, have a waiting period, e.g. 30 days, before they become active.
Do you and your family know what you would do if you needed to evacuate your home in a hurry? Sit down with your family and make a plan. Have a designated spot so everyone knows where to go if you can’t meet up at your home. Make sure all your local and family emergency contact information is in an easy to access location. Create your own disaster kit. Include the following:
The government’s National Flood Insurance Program defines special high risk flood hazard areas as those with at least a 1 percent chance of annual flooding. Under a new law, known as Biggert Waters, premium rates on many properties in these special flood hazard areas will increase. Rates for nearly all buildings located in special flood hazard areas will be revised over time to reflect full flood risks. Subsidies and grandfathered rates will be eliminated for most properties in the future. Starting Jan. 1, 2013, premium rates for subsidized policies insuring nonprimary residences began increasing. Rates will increase 25 percent per year until they reflect the full nonsubsidized rate. Later in 2013, there will be premium rate increases for additional categories of subsidized properties including business properties, substantially damaged or improved properties, severe repetitive loss properties, and any property that has incurred flood related damages where claim payments exceed the fair market value. Beginning in 2014, premium rates for other properties, including nonsubsidized properties, will increase as new or revised flood insurance rate maps become effective and full risk rates are phased in. These premium rate increases will include areas that have received new or revised flood insurance rate maps since July 6, 2012, the date of enactment of the new law. Additionally, even if you build to minimum standards today, you will be subject to significant rate increases upon remapping if your flood risk changes in the future. Freeboard is a safety factor requiring buildings to be constructed higher than the calculated flood level to provide better protection and reduce damages. About half the 21,000 flood prone communities in the NFIP require 1 to 3 feet of freeboard for buildings. Based on the current premium rates for NFIP flood insurance, premiums can generally be reduced 50 percent or more if buildings use 2 feet of freeboard. Given the impact of sea level rise, subsidence on some areas of the coast and changing flood conditions, a 3-4 foot freeboard in coastal areas is
You may not need the extra insurance offered by the rental car company. First of all, as long as the rental car will not be driven out of the U.S., its territories and/or possessions, Puerto Rico, or Canada, then the “liability” insurance is unnecessary. However, if your travel plans include another destination such as Europe, then you should touch base with your agent. When you have a New York personal auto policy you automatically receive rental car protection with that policy. This is not typical of policies issued in other states which is why a rental car company in Florida may attempt to convince you that you need the extra protection. However, in most cases, you don’t need it. So spend the cost savings on extra fun instead of extra insurance. When in doubt, call your agency before you reserve a rental car. Review the details of the trip you’ve planned and they’ll help you determine what’s best for you.
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