Florida homeowners may have hurricane and flood insurance but according to the Insurance Information Institute very few understand the coverage in their policies.
The III reports the "exclusions or limitations" in standard homeowners policies are caught "only after a natural disaster, despite the fact that the most important coverage they need is in the biggest, boldest type at the front of their insurance policy."
Additionally, some people learn too late that the coverage decisions they made to save money may cost them dearly. Understanding what your policy covers—and what it does not cover—is essential to being properly protected and to bringing about full recovery from catastrophic storm damage, said the Florida Insurance Council.
Florida insurance law requires specific language to be included in front of property insurance policies to alert policyholders to important coverage options and out-of-pocket costs they may face. The law not only dictates the exact wording for these messages, it also dictates the size of the type—no smaller than 18-point type in boldface, CAPITAL LETTERS. "If you take the time to actually read your insurance policy, there is no way you can miss these messages. But reading them is not enough. You've got to carefully weigh what it means if you ignore them," cautioned Lynne McChristian, Florida representative for the I.I.I.
Three important subjects are covered in big-type messaging:
- The importance of flood insurance, which requires a separate policy from the federal government;
- Purchasing Law and Ordinance coverage to account for the increased costs of rebuilding structures to current building codes;
- The existence of separate deductibles for hurricane losses
Why Flood Insurance Is Important
Most of the natural disasters in U.S. history involve flooding, and standard homeowners policies do not cover flood damage. Coverage is available through the federal government.
"Floridians have experienced torrential rains that drop inches of rain over a few hours miles away from where a storm makes landfall," said Sam Miller, executive vice president of FIC. "And, only a flood insurance policy can protect you from the flooding this rain may cause, but you have to buy it before a deluge as there is a 30-day waiting period before coverage begins."
In high-risk areas, flood insurance is required by mortgage companies. Yet, some people may allow this coverage to lapse. Perhaps they are unaware that there is at least a 1-in-4 chance of flooding over the course of a 30-year mortgage.
Although flood insurance is not required for those living in moderate-to-low risk zones, 20 percent of all flood claims are paid out in these areas, according to the National Flood Insurance Program.
Flood insurance offering both residential coverage for homeowners and renters and commercial coverage for business owners is available. You can inquire about a policy through your current insurance company or agent.
Why Law and Ordinance Coverage Is Important
Florida has a large number of older homes, and the cost of reconstruction can exceed the coverage limits of your homeowners policy. That is because damaged homes must be repaired or rebuilt to comply with the current building code—not the code that was in effect when the home was originally constructed.
Building codes establish the minimum requirements for construction; they cover everything from structural safety to wiring and plumbing, and over time the standards rise. Most property insurance policies are designed to rebuild or repair property to its previous condition. The coverage is not intended to pay all the costs associated with an update to the building to make it comply with the latest zoning laws and building codes. That's where Law and Ordinance coverage comes in.
Some insurers have a guaranteed replacement cost policy to pay for the increased costs of reconstruction; others offer policyholders the option of purchasing Law and Ordinance coverage for either 25 percent or 50 percent of the dwelling limit. The older your home the more important this coverage becomes.
Why Knowing Your Hurricane Deductible Is Important
You likely have a standard deductible on your homeowners policy that is $500, $1,000 or $2,000. And, if the insured value of your home is less than $100,000, the hurricane deductible you have chosen may be identical to this amount. However, hurricane deductibles for Florida homes valued at $100,000 and above have a minimum hurricane deductible of 2 percent of the insured value. That means with the home insured for $200,000, the 2 percent hurricane deductible would be $4,000. Knowing this in advance will help you plan for it financially.
"Hurricane deductibles are required by Florida legislation, and the Declarations Page of your policy shows you exactly how much it is," said Miller. Some people may have chosen higher deductibles, as the options go as high as 10 percent. Higher deductibles receive a premium credit, yet it increases the out-of-pocket costs that would have to be paid.
"Never choose a deductible that is higher than you can afford," McChristian said. "If you are questioning whether you've set the deductible too high, the time to change it is now. You can change the deductible any time—except when a storm is heading our way."
Backgrounder: How Hurricane Deductibles Work in Florida
Facts and Statistics: Florida Hurricane Facts
Blog: Code Ready with Building Law and Ordinance Coverage
The III has a full library of educational videos on its You Tube Channel. Information about III mobile apps can be found here.
THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.
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