1. Does homeowner's insurance cover floods?
(MoneyWatch) As residents affected by superstorm Sandy head back to their homes, many are likely
to face an unpleasant reality: Homeowners insurance does not cover flooding.
Only people with flood insurance are covered against the kind of storm surges that cascaded
through New York and New Jersey. Those with homeowners insurance alone are likely to be
compensated for their losses only when the damage was caused by wind or water pouring in from
the sky, rather than from ground level.
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"We issue a lot of news releases, and [the Federal Emergency Management Agency] spends a lot of
time and money trying to inform people about flood insurance, but even still it comes as a surprise to
some people that they're not covered through their homeowners policy," said Jeanne Salvatore,
spokeswoman for the Insurance Information Institute.
Indeed, those affected by the hurricane may find their insurance coverage befuddling. That's
because whether you're covered, and exactly what is covered, varies dramatically based on what
caused the loss and what was damaged.
For instance, your car is covered mirrors to wheels no matter whether it was washed away in a flood
or crushed by a tree. That's because "comprehensive" coverage on your car is just that --
comprehensive. In most cases, damage to a car will be the simplest claim, with insurers paying the
current market value for a complete loss, minus your deductible. (See Will insurance pay for storm
damage to your car?)Â
When it comes to your home, however, coverage depends on what insurance you have and the type
of damage that was suffered. Here's what's covered by homeowners vs. flood insurance.
Homeowners coverage
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Fire: Ironically, the people in Breezy Point in the Queens borough of New York whose homes were
consumed by fire during the storm are likely to have the easiest time making insurance claims. Fire
losses are unequivocally covered by homeowners' policies to the limits of the policy. That means the
insurer will pay up to the limits on your structure coverage, coverage for a home's contents, and for
its loss of use, such as the cost of putting you up in a hotel or rental apartment while your residence
is repaired. In most cases, insurance companies are willing to advance partial payments for current
living expenses.
Wind damage: If your roof blows off, windows are smashed or a tree blows over and crushes your
home, you're covered by your homeowners policy. In addition, you're covered for the rain that comes
into the house from the sky.
Water damage: If your damage is solely from rain, you're covered under your homeowners policy.
However, if the damage came from a "rising tide of water," like the storm surges that swamped
many coastal cities in New York and New Jersey, you are only covered for that portion of the loss
only if you bought flood coverage. Flood coverage is completely separate from your homeowners
insurance and is subject to different limitations (see below).
Loss of use: If your house became uninhabitable because of storm damage -- not flood -- the "loss of
use" coverage on your policy would be triggered and your insurer will compensate you to live in a
3. rental until the house is repaired, or until a set number of months has passed, depending on the
details of your policy. Loss of use coverage typically lasts for 12 to 24 months after a natural
disaster.
Miscellaneous: A typical homeowners policy will also have numerous other types of coverage, such
as for separate structures and clean-up. But it will also have some limitations on how much the
company will pay for specific types of losses, such as a loss of electronics, art work or jewelry. The
best advice is to read your policy carefully.Â
Flood coverage
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Flood insurance is provided through a federal program that's administered by the Federal
Emergency Management Agency, better known as FEMA.
The silver lining of last year's Hurricane Irene is that it was a wake-up call for many homeowners to
buy flood coverage, said Robert Hartwig, president of the Insurance Information Institute. As a
result, many homeowners in the coastal New Jersey and New York cities that suffered the most
damage are likely to have purchased flood coverage and find that at least a portion of their losses
are insured.