National Risk Management and Associates

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Infographic on Hurricane Deductibles

Courtesy of iii.org

The official Atlantic hurricane season runs from June through November, but occasionally storms form outside those months. September is the most common month for hurricanes making landfall in the U.S., followed by August and October, according to an analysis of 1851 to 2015 data by the National Oceanic and Atmospheric Administration. No hurricanes made U.S. landfall before June and after November during the period studied.

2018 Hurricane Forecast: Dr. Philip Klotzbach and Michael Bell of Colorado State University (CSU) released an updated forecast for the 2018 Atlantic hurricane season at the end of May. The CSU team now envisions a near-average season with 14 named storms, six hurricanes, and two major hurricanes. The May forecast is slightly lower than their original outlook which called for 14 named storms, seven hurricanes, and three major hurricanes. A typical year has 12 named storms, six hurricanes, and three major hurricanes, according to the National Oceanic and Atmospheric Administration (NOAA). Major hurricanes (Category 3 or higher) have sustained wind speeds of at least 111 miles per hour.

What is a Hurricane Deductible?

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Insurance Guide 2018 Hurricane Season

Courtesy of iii.org

Hurricane season takes place June 1 – November 30 every year. Don’t wait until after you have a loss to check your insurance—review your homeowners or renters policies to make you have the right coverage in the event you’re hit with a destructive storm.

Make sure your home’s structure has adequate coverage

Standard homeowners insurance covers the structure of your house for disasters such as hurricanes and windstorms, along with a host of other disasters. It’s important to understand the elements that might affect your insurance payout after a hurricane, and adjust your policies accordingly.

  • Understand your hurricane/windstorm deductible – Insurers in every coastal state from Maine to Texas include separate deductibles for hurricanes and/or windstorms in their homeowners policies, stated on the Declarations (front) page of your homeowners policy.

A hurricane deductible is applied only to hurricanes, whereas a windstorm deductible applies to any type of wind. If your policy has a hurricane deductible, it will clearly state the specific “trigger” that would cause the deductible to go into effect.

Unlike the standard “dollar deductible” on a homeowners policy, a hurricane or windstorm deductible is usually expressed as a percentage, generally from 1 to 5 percent of the insured value of the structure of your home.

If you live in an area at high risk for hurricanes, your hurricane deductible may be a higher percentage. Depending on your insurer and the state where you live, you may have the option of paying more money in premiums in exchange for a lower deductible.

Like any deductible, a hurricane or windstorm deductible will affect the bottom line of your insurance payout. If you have a high hurricane or windstorm deductible consider putting aside the additional money you may need to rebuild your home.

One common exclusion is flooding. People tend to underestimate this risk, but 90 percent of all natural disasters—especially hurricanes—include some form of flooding. If you live in a flood zone or a hurricane-prone area, a separate flood insurance policy is a must.

Another common exclusion is sewer backups (which is also not covered by flood insurance) Sewer backup insurance is also good to have in hurricane-prone areas.

Get to know all of the exclusions in your policy and either talk to your insurance professional about purchasing separate coverage, or be prepared to pay out of pocket for the damages that are excluded in your policy.

  • If you own a co-op apartment or condo – check with your management company and the bylaws to understand what is covered under the building’s master insurance policy versus what damages you need to cover in your own co-op or condo owners insurance policy.

Make sure your possessions are adequately insured

Imagine the cost of repurchasing all of your furniture, clothing and other personal possessions. Whether you have homeowners insurance or renters insurance, your policy provides protection against loss or damage due to a hurricane.

  • Determine the value of your possessions with a home inventory – Creating a full inventory of your belongings and their value will make it easy to see if you are sufficiently insured for either replacement cost or cash value of the items. It will also help speed the insurance claims process and help provide proof of losses for tax or disaster aid purposes.
  • Review your policy to ensure you’re adequately covered – Homeowners policies provide approximately 50 to 70 percent of the amount of insurance you have on the structure of your home. If you rent, know that your landlord’s insurance will only cover the structure of your home—you need a renters policy to protect your possessions against loss or damage.

Make sure your policy provides enough coverage for additional living expenses

Additional living expenses (ALE) covers the extra costs incurred if you need to live elsewhere because your home is rendered uninhabitable as the result of a hurricane (or any other insured disaster). While your home or apartment is being repaired or rebuilt, ALE covers hotel bills, restaurant meals, etc.—expenses over and above what your customary living expenses would be at home. Generally, the ALE policy limit is 20 percent of the amount of insurance coverage on the structure of your home. Standard renters policies also provide for ALE.

  • Most insurers offer the option of higher coverage limits – Depending on where you live (which may dictate your expenses), you may want to consider a higher ALE.
  • ALE reimbursements may be limited to a specified amount of time – Make sure you’re comfortable with the time limits in your policy.
  • If you rent out part of your home, ALE coverage also reimburses you for lost rental income. Make sure your policy reflects the current amount of your rental income.

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2018 Hurricane Forecast for Florida and more

Courtesy of iii.org

On Thursday April 5th Philip J. Klotzbach and Michael M. Bell, scientists with the Colorado State University, issued their 2018 Atlantic Hurricane Forecast. The forecast anticipates slightly above-average activity for the 2018 Atlantic basin hurricane season.

There is slightly above-average probability of a major hurricanes making landfall along the continental United States coastline and in the Caribbean.

Klotzbach and Bell estimate that 2018 will have 7 hurricanes (median is 6.5), 14 named storms (median is 12.0), 70 named storm days (median is 60.1), 30 hurricane days (median is 21.3), 3 major (Category 3-4-5) hurricane (median is 2.0) and 7 major hurricane days (median is 3.9). The probability of U.S. major hurricane landfall is estimated to be about 120 percent of the long-period average.

Probabilities for at least one major hurricane landfall on each of the following coastal areas:

  • Entire continental U.S. coastline – 63% (average for last century is 52%)
  • U.S. East Coast Including Peninsula Florida – 39% (average for last century is 31%)
  • Gulf Coast from the Florida Panhandle westward to Brownsville – 38% (average for last century is 30%)

As is the case with all hurricane seasons, coastal residents are reminded that it only takes one hurricane making landfall to make it an active season for them. They should prepare the same for every season, regardless of how much activity is predicted.

Click here for the full forecast.

Dr. Philip Klotzbach is a non-resident scholar for the Insurance Information Institute (I.I.I.)

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Business Interruption Insurance – What is it?

Courtesy of iii.org

Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. But too many small business owners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential.

  1. Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
  2. Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
  3. The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

Extra expense insurance

Extra expense insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually, extra expenses will be paid if they help to decrease business interruption costs. In some instances, extra expense insurance alone may provide sufficient coverage, without the purchase of business interruption insurance.

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2018 Guide for Renter’s Insurance

Courtesy of iii.org

If you rent a house or apartment and experience a fire or other disaster, your landlord’s insurance will only cover the costs of repairing the building. To financially protect yourself you will need to buy renters or tenants insurance.

Renters insurance protections

Like homeowners insurance, renters insurance includes three key types of financial protection:

  • Coverage for personal possessions
  • Liability protection
  • Additional living expenses (ALE)

The big difference is that renters insurance doesn’t cover the building or structure of the apartment—that’s the landlord’s responsibility.

The following questions will help you choose the right coverage when you are shopping around for renters insurance or discussing your needs with an insurance professional.

Coverage for personal possessions

Coverage for your personal property is a key component of renters coverage, protecting you from theft, fire and a host of other unfortunate events.

1. How much insurance should I buy?

Make sure you have enough insurance to replace all of your personal possessions in the event of a burglary, fire or other covered disaster. The easiest way to determine the value of all your personal possessions is to create a home inventory—a detailed list of all of your belongings along with their estimated value.

2. Should I choose replacement cost or actual cash value coverage?

Actual cash value policies include a deduction for depreciation (that is, the idea that items lose value over time). Replacement cost coverage is pricier but can be well worth the extra expense if your belongings are damaged or destroyed (think about how much you’d get for your TV used versus how much it would actually cost to replace).

3. What disasters are—and are not—covered?

Renters insurance covers you against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage (such as from a burst pipe or when the tenant upstairs leaves the water running in the bathtub and floods your apartment).

Like standard homeowners policies, most renters insurance policies do not cover floods or earthquakes. Flood coverage is available from the National Flood Insurance Program and a few private insurers. You can get earthquake insurance as a separate policy or have it added as an endorsement to your renters policy, depending on where you live.

4. What is my deductible, and how does it work?

A deductible is an amount of money you responsible for paying before your insurance coverage. For example, if you have a $500 deductible and a fire destroys $5000 worth of furniture, the first $500 is your responsibility and your insurance company will cover $4500.

Renters insurance deductibles are generally specified as a dollar amount, which can be found on the Declarations page of your policy. In general, the larger the deductible, the lower your insurance premium.

5. What is a “floater” and do I need one?

A floater is a separate policy that provides additional coverage for more costly valuables if they are lost or stolen. If you have expensive jewelry, furs, collectibles, sports equipment or musical instruments, consider adding a floater to your policy to protect against their loss.

6. Am I covered if I am traveling or away from home?

Most renters polices include what is called off-premises coverage, which means belongings that are outside of your home are covered against the same disasters listed in your policy. For example, property stolen from your car or a hotel room while you’re traveling would be protected.

Liability protection

7. What is liability insurance?

Renters insurance provides liability protection that covers you against lawsuits for bodily injury or property damage done by you, your family members and even your pets. This coverage pays for the cost of defending you in court, up to the limit of your policy.

Your renters policy should also include no-fault medical coverage as part of the liability protection. Medical payments coverage allows someone who gets injured on your property to simply submit his or her medical bills directly to your insurance company so the bills can be paid without resorting to a lawsuit.

8. Do I have enough liability insurance?

Make sure the amount of liability coverage provided by your policy is sufficient to protect your financial and other material assets in the event of a lawsuit.

9. Do I need an umbrella liability policy?

If you need a larger amount of liability protection, consider purchasing a personal umbrella liability policy. An umbrella policy kicks in when you reach the limit on the underlying liability coverage provided by your renters or auto policy. It will also cover you for things such as libel and slander.

Additional living expenses

Additional living expenses (ALE) coverage provides coverage if your home is destroyed by an insured disaster and you need to live elsewhere for a time.

9. What does ALE cover?

The additional living expenses portion of your rental insurance policy pays for hotel bills, temporary rentals, restaurant meals and other expenses you incur while your rental home is being repaired or rebuilt. Essentially, it covers the expenses you would not have to incur if you had your usual roof over your head.

10. How much does ALE cover?

Most policies will reimburse you the full difference between your additional living expenses and your normal living expenses; however, there are generally limits as to the total amount the insurer will pay or time limits specifying how long you’re eligible for the ALE payments. Make sure you’re comfortable with the limits of the policy you choose.

Multiple policy and other discounts

10. What types of discounts are offered on renters insurance?

Insurance companies often offer discounts on renters insurance if you have another policy with them—for example, car insurance or business insurance.

You may also get a discount if you:

  • Have a security system
  • Use smoke detectors
  • Use deadbolt locks
  • Have good credit
  • Stay with the same insurer
  • Are over 55 years old

Discounts may vary widely by insurance company and by state, so review your options carefully. As always, the same rule-of-thumb applies: shop around for the best deal.

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24 Hour Hotline: (407) 415-8528

National Risk Management & Associates
220 Magnolia Avenue
Sanford, FL 32771
Phone: (407) 767-2950