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Is your insurance ready for tornado season?

Underinsured face major expenses

(Published April 24, 2007, 4:22 p.m.)

Homeowners who are underinsured for severe storm damage face the possibility of heavy out-of-pocket expenses if disaster strikes.

The Wisconsin Office of the Commissioner of Insurance (OCI) is encouraging consumers to check their insurance policies to make sure they are properly insured for damage that may result from severe weather.

"Wisconsin has an average of 21 tornadoes and over 80 severe thunderstorms a year," Sean Dilweg, Commissioner of Insurance was quoted as saying in a news release. "These storms can cause significant damage to many people's homes, and since the typical family's largest asset is their home, you want to make sure it's protected."

Typical homeowner's policies usually provide coverage for damage that is the direct result of severe weather. This includes hail and high winds, but not flooding. To protect yourself against floods, a separate policy must be purchased from the National Flood Insurance Plan (NFIP).

NFIP flood insurance is a federally backed program managed by the Federal Emergency Management Agency (FEMA). Flood insurance typically covers direct physical losses resulting from floods, flood-related erosion, severe rainstorms, flash floods and mudslides. Under the flood insurance program, coverage may be purchased as long as the property is located in a community that participates in the NFIP. To verify if a community participates, check with a property insurance agent or visit the FEMA Web site at www.fema.gov/business/nfip. Information on the program can be obtained by calling 800-427-2419 or visiting www.floodsmart.gov.

Damage resulting from sewer backup and sump pump problems is also rarely covered in homeowner's policies, but may be added through endorsements. Endorsements are a special coverage portion that adds additional coverage to the homeowner's policy. OCI recommends consumers review all endorsements closely before they are added to the policy. Different insurers offer different levels of coverage for sewer backups, so consumers should shop around to find the policy that best fits their needs.

It is also important for consumers to check the "Conditions" section of their homeowner's policy. Insurers can limit how much they are responsible to cover as a condition of the homeowner's policy. For example, policies with replacement coverage may limit the insurer's financial obligation to a percentage of the home's replacement value. In such a case, the consumer should determine how much they may be financially responsible for if damage occurs to their home that exceeds the insurer's commitment. Consumers should contact their agent for help understanding the specific conditions of their policy.

"Consumers should be aware there is a variety of coverages available for homeowner's insurance. What is included in one policy may not be covered in another," said Dilweg. "Because of this, consumers need to make sure they understand their policy so that they can make any needed adjustments. A little planning now can save a lot of time and money in the future if you have to make a claim."

If your home is damaged by a storm, consumers should take the following steps:

1. Notify your company or agent as soon as possible to begin filing an insurance claim.

2. Make any necessary repairs to protect yourself from further loss or damage as soon as it is safe to do so.

3. Make a list of damaged items and start collecting receipts from the cost of repairs.

4. Take photographs of the damage for the insurance company.

5. Don't throw away furniture or expensive items damaged by the storm. Your insurance adjuster will want to see these.

Before making a claim, consumers should determine if the damage exceeds any deductible and is significant enough to make a claim. For minor damage that is easily repaired, it may be best to not report a claim. Insurance companies track a home's "claims history" (the frequency of claims), and insurers can decide to not renew a policy based on whether they believe the policyholder has become too great a risk compared with other policyholders. Thus, homeowners with relatively small claims may want to weigh the benefit of filing a claim versus the possibility of creating a higher-risk claims history.

More information about homeowner's insurance and filing claims is available in publications such as Consumer's Guide to Homeowner's Insurance and Settling Property Insurance Claims. Both are available on the OCI's Web site at oci.wi.gov. Hard copies of the publications may be requested by e-mailing publications@oci.state.wi.us, by calling 800-236-8517, or by writing OCI Publications, P.O. Box 7873, Madison, WI 53707-7873.

 

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