Disaster Insurance: Waste of Cash or Help in a Flash?
Disaster Insurance: Waste of Cash or Help in a Flash
?What constitutes a disaster? Does my homeowners insurance cover me when "disaster" strikes? What if a tree falls on my car, or it gets damaged in a hail storm? Am I covered if there's an earthquake? A flood? A hurricane? How expensive would it be if I needed coverage for all of the above?
These are hard questions that homeowners too seldom ask. For the average homeowner, not carrying disaster insurance coverage is an often unconscious choice. While some homeowners don't realize that they're not already covered should the unthinkable happen or that they even need coverage, others knowingly avoid the high premiums and limited coverage offered by the average policy. Still others just take their chances hoping that they won't need insurance proceeds to help rebuild when mother nature gets cranky.
Should I be carrying Disaster Insurance Coverage?
Disaster Insurance policies are best utilized as a means of protection from certain financial ruin in the event of catastrophe and natural disaster definitively constitutes catastrophe.
Unfortunately, the cost/benefit ratio can get a bit complicated. Often times, the cost of maintaining disaster insurance can seem unreasonably high while the risk is remote. On the opposite end of the spectrum, there are the over-cautious property owners who may be carrying duplicate coverage that is as expensive as it is unnecessary. Another potentially expensive mistake can be over-insuring a property for more than its worth. Insurance companies will pay based on the value of the property before disaster, so its a good idea to stay up to date on the value of your home, especially these days! If your home has lost value in the recent downturn, its up to you to adjust your coverage accordingly.
The 3 main considerations:
your location
your financial status (how much you stand to lose)
your willingness to live with the risk
Read your Insurance Policy!
Too many property owners read their policies only after something bad happens. You should be well informed of what your policy covers, what it doesn't cover and whether the limits are adequate. Sit down with your insurance agent and pick their brain about homeowner's policy. Frankly, you hired them to write your policy so they should be able to answer questions about your coverage or lack thereof. Find out if and how you can buy additional coverage or if its even available. This will depend on the most important of the aforementioned 3 factors your location. It depends also on what your trying to protect your property against. Chances are, if you live in an area prone to such calamities as earthquakes or flash floods, your homeowners policy by itself won't cover you. If you live in an area prone to tornadoes, hail storms or hurricanes, chances are your policy doesn't cover these events or the damage they cause.
If you require and therefore carry disaster insurance, make sure your not carrying duplicate or excessive coverage. Make your insurance agent work for their commissions! Approach them with a yearly coverage tune up and adjust your policy to commensurate with any changes in circumstance.
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