An Ounce of Prevention …
By Jane L. Lyon
It’s been said that an ounce of prevention is worth a pound
of cure. While many Floridians are still dealing with the devastation of the
2004 hurricane season, the 2005 season is just around the corner. The
Department of Financial Services urges all Floridians to review their insurance
policies, to conduct an annual check-up. Preventive measures now could prove
beneficial later.
Preparation:
Can you get to all of your insurance policies right
now? Are these and other important papers, including address books,
doctor’s names, medical information such as allergies and prescriptions and bank
account information together? If names are stored in a cell phone or on redial,
take a few minutes and write them down. Many phone systems shut down in the
event of a hurricane or other disaster. It is also recommended that you keep
these items in a waterproof container with one copy kept in another location,
such as a safety deposit box.
Do you have an evacuation plan? Where is the nearest
shelter? Individuals with special medical needs should be registered
with the American Red Cross to assist in meeting those special needs. Family or
a trusted neighbor should know your evacuation plans. As Floridians face the
2005 hurricane season, these are questions they need to be able to answer and
actions for which they need to plan.
Do you know what your homeowner’s insurance policy
covers? Many policyholders have a tendency to sign the policy every
year without adjusting the coverage to the current property value. The majority
of Floridians do not have money set aside to cover their out-of-pocket expenses
in the event of a hurricane or to cover their deductible. These are things to
plan for this hurricane season.
Now is the time to also make improvements to your home
enabling it to withstand hurricane force winds. Homeowners should check with
their insurance agents to determine what measures would offer discounts on their
insurance premium. Typical measures include reinforcements for the roof and any
openings (garages, windows and doors).
Key Questions to ask:
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What is my deductible?
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What is my hurricane deductible?
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Do I have enough coverage to replace my home and belongings?
Insurance Review:
Floridians affected by the 2004 hurricanes were shocked and
confused over what their insurance would and would not cover , and the amount of
their deductible.
Here is a brief review of key items every homeowner
should check for in their insurance policy:
Hurricane Deductible: This deductible is based on
the value of the insured property, not the estimate of damage and applies only
to hurricane claims (i.e., resulting from a hurricane declared by the National
Weather Service). This is the amount the homeowner is responsible for out of the
total damages to the home. It is usually stated as a percentage (2% or 5% is
standard) of the policy limits. For instance, a home insured for $200,000 with a
2% deductible, would mean the homeowner is responsible for the first $4,000 of
damage to the home.
Flood Insurance: Typically, homeowner’s policies
exclude flood damage. Flood is described as rising waters. Some homeowners
qualify for flood insurance through the National Flood Insurance Program
(NFIP). This is a national program, not regulated by the Florida Department of
Financial Services.
Actual Cash Value: Actual cash value is the
depreciated value of property damaged in a storm. For example, the insurance
company would deduct for the age and condition of a 17-year old roof with a
20-year life expectancy.
Replacement Cost: Replacement cost is the amount
needed to replace or repair your damaged property with materials of similar kind
and quality, without deducting for depreciation. Using the example above, the
insurance company would not deduct for age and condition of a 17-year old roof
with a 20-year life expectancy. The insurance company would pay for the
replacement of the roof with materials of similar kind and quality.
Ordinance or Law Coverage: If a local building
ordinance or law increases the cost of repairing or replacing an insured
dwelling, the insurance company will not pay that additional amount, unless this
coverage is added to the policy. Example: A home built in 1982 called for
construction at least 5 feet above the ground. In 2001, the building code
changed requiring the same construction at least 10 feet above the ground.
Complying to this code will cost the homeowner more money. Florida law
requires that policies include Ordinance or Law coverage (for an additional
charge) up to 25 percent of the settlement, unless the policy owner opts out of
it in writing. Exluding Ordinance or Law coverage means the insurance company
will not pay additional costs to bring the repaired home up to current building
codes.
A homeowner’s agent MUST
offer an insured this coverage and some companies automatically include in their
coverage. If the insured declines this coverage, a form must be signed.
Additional Living Expenses (ALE): Homeowners
packages provide additional living expense coverage that will pay some extra
expenses if damage to your home requires you to live elsewhere while it is being
repaired. The items typically covered include extra costs for food, housing,
telephone, transportation (to and from work or school), relocation and storage,
utility installation and furniture rental for a temporary residence.
Most polices will provide this coverage when a civil
authority (law enforcement agency, emergency management services) prohibits the
use of a residence due to direct damage to neighboring homes by a covered threat
(like a named storm or natural disaster). Polices generally offer this coverage
without any deductible.
This coverage only applies to differences in expenses. For
example, it would apply to the cost of restaurant meals minus normal food
expenses. It does not cover mortgage payments, groceries and utilities or the
monthly cost of a telephone in a rented space since this is a normal household
expense.
Policies may designate a limit of coverage for additional
living expenses, but does not obligate the insurance company to pay this amount
in advance or in full. The policyholder must keep receipts for expenses and
submit them to the insurance company for reimbursement.
Department of Financial Services Response:
The Department of Financial Services continues to assist
hurricane victims with their insurance needs. Since August 13, 2004 when the
first of four hurricanes made landfall, the department has received more than
300,000 calls and handled more than 50,000 consumer requests for assistance.
More than 150 department employees have been in the field
providing insurance assistance. In addition, other states sent their experts to
assist in this process. Thousands of consumers are assisted by department staff
through the command centers and disaster recovery centers.
For more than 30,000 consumers hit with multiple
deductibles, nearly $31 million has been paid out to help cover these costs.
Since that time, the Florida Legislature passed a law mandating only one
hurricane deductible per hurricane season.
After each storm, the Department of Financial Services
deploys mobile response units to impacted areas and mobile command centers are
operational within 72 hours of the hurricane landfall. The department encourages
insurance companies to join them at these command centers to assist their
customers with their claims.
When a names storm has been declared, DFS opens its
1-800-22-STORM line for hurricane victims to call to discuss for help with their
hurricane claim.
DFS also coordinates mediation between consumers and their
insurance companie to help resolve claim disputes. More than 7,000 homeowners
participated in mediation for their 2004 hurricane claims. Mediation has had a
93 percent success rate.
For more information on
preparing for hurricane season 2005, call the Florida Department of Financial
Services’ toll-free helpline (800) 342-2762 or visit our website at
myfloridacfo.com
Note: Jane Lyon is the Regional
Manager of the Consumer Services, Florida DFS. For additional information or to
request a speaker for your organization, please contact the local office at
(727) 587-7260.
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