The spate of natural disasters hitting the United States in recent weeks -- from floods to tornadoes -- has left many of us wondering whether we've got enough -- and the right -- insurance to cover us in the event we're victimized by Mother Nature.
For answers, The Early Show turned to SmartMoney magazine Senior Editor Beverly Goodman Wednesday.
According to Goodman:
Every homeowner SHOULD have a homeowners insurance policy, but most people probably don't need disaster insurance. If you live in an area prone to certain types of natural disasters, then yes, it's a good idea to get hurricane insurance, flood insurance, etc. Most people know if they're living in one of these zones. If you don't live in one, you probably have coverage in your homeowner's policy that will cover some natural disasters. In fact, your homeowners policy might cover far more than you think.
You should definitely:
READ YOUR HOMEOWNERS INSURANCE POLICY
It sounds obvious, but read your policy thoroughly. It's amazing how many people don't read it until after disaster has struck. Make sure you have coverage for the replacement value of items, so even if they've gone down in value (whether you're talking clothes in the closet or landscaping equipment in the garage), you'll get enough money to buy new items. The standard HO-3 form (your basic homeowners policy) covers quite a lot, including fire, lightning, hail, vandalism and damage from riots or civil commotion.
PURCHASE THE GUARANTEE FOR REPLACEMENT BUILDING COSTS
This is particularly important if a disaster affects a local economy, making it harder (and more costly) to rebuild. Everyone should do this, even if they don't live in a flood zone, a hurricane zone or an earthquake zone. If something were to happen to the physical structure of your house, you'll be able to rebuild with less of a personal financial burden.
CONSIDER EXTRA COVERAGE AND COSTS
While the standard HO-3 form covers quite a lot, it DOESN'T cover floods, earthquakes, war and nuclear accidents. Flood insurance is only underwritten by the Federal Emergency Management Agency (FEMA). It's pretty cheap -- $400 to $800 in high-risk areas, but only covers up to $250,000 in building damage and $100,000 in personal property. You can purchase supplemental coverage from private insurers. Earthquake coverage is harder to find, though required for California home buyers; it can be purchased from the state. The same goes for hurricane coverage. Costs vary widely, depending on home value and location, but if you use Web sites such as InsWeb.com and Quicken InsureMarket, you can get multiple quotes. And see what your agent will do for you: Homeowners overall pass up on $300 million in discounts they probably don't even know they're entitled to, so it pays to ask. You can often get a better deal if you combine policies (home and car, second home, etc), or install safety or protective equipment.
THINK BEFORE YOU FILE
It's possible you'll pay for a policy you'll never use and don't understand, rending you unable to use it, and that translates into a loss of money. If you're struck by a natural disaster, think before sending in that claim form. Premiums are higher for people who make a lot of claims, so consider fronting the money for smaller claims. If your basement is flooded, or if you've got a tree that's been knocked down by lightning, find out how much it will cost you to do the repair or clean up on your own. A good rule of thumb is to hold off on filing on claims of up to $1,000. Anything above $1,000, you should file for.
GET ORGANIZED NOW!
Keep really good records of everything of value, including photos, estimates on belongings, police reports, and notes on conversations with your insurer. Take those photos of your furniture, electronics, etc., with the values marked next to each, and keep it all in a book or an envelope, and put it in a safe deposit box. It doesn't have to be all that involved.
Re-evaluate your policy if you've done more than $5,000 worth of work on your home since you got your policy.
If you have items of real monetary or sentimental value, you should consider buying extra insurance or a rider on certain items, so you get fully reimbursed if they're lost.
Track all related expenses, including babysitting, medical, home care and living expenses if you're forced to move. A portion of those may be covered.
The more organized you are, the more likely you'll get what you file for, and get it quickly.
If it's all too overwhelming for you, you can employ a public adjuster to file your claim. Look for one who is licensed by your state. They'll charge between 5 percent and 15 percent of your reimbursement.
You're completely torn apart when something like this happens. It makes the whole process easier if you're prepared, and now's a great time to prepare.
ARE CERTAIN POLICIES BETTER TO BUY THAN OTHERS?
Fire is covered by standard homeowners policies. The short answer is no, there's no one rider everyone should get. If you need flood insurance, get flood insurance. If you have a lot of fine art or heirlooms you want to protect, you may want to purchase more insurance on them.
What makes everything easier is keeping those good records. If it gives you a little piece of mind, whether or not disaster strikes, do it. Put a value on the things you own. You may have some really expensive things, but if you wouldn't feel a huge need to replace them, don't buy extra protection on them.