Hard Hit: Hurricane Survivors & the Nightmare of Insurance Company Loopholes


The United States' coastline has been hit hard by hurricanes so far this year-and the hurricane season has just begun.

Many homeowners have already been forced to fight their insurance agencies in order to get their losses covered. Some are finding out that their insurance policy had stipulations and conditions that were previously unbeknownst to them, but now have become a harsh reality.

The First Blow: Insurance Company Word Games

It can be devastating when a hurricane victim discovers their losses aren't covered because the insurance company said they sustained hurricane damage that wasn't covered under their homeowner's insurance, or that they sustained flood damage that wasn't covered under their hurricane insurance.

Sometimes it seems as if the insurance companies are playing a never-ending word game to avoid paying out on policies. Some homeowners may think that it's a game that they have no chance of winning.

Unfortunately, some insurance agencies and agents have played the system to benefit themselves. Protect yourself and know which insurance coverage covers what damages.

The Basics of Homeowner's Insurance

Basic homeowner's insurance policies do not cover flood damages. Most general homeowner's insurance policies also don't cover hurricane damage.

If you live in a hurricane-prone area, you will likely need hurricaneand flood insurance.

If you do have hurricane insurance, make sure you know whether your home is covered for flooding. Most hurricane insurance policies cover losses related to the hurricane except for flood damage, so a separate flood policy is oftentimes needed.

All these insurance plans can add up to be a bit pricey; however, when you consider the alternative consequences of being underinsured-it can be a little easier to foot the insurance bill.

If you simply can't afford hurricane coverage, many states vulnerable to hurricanes have government-mandated insurance plans that provide hurricane insurance coverage to property owners who are unable to afford insurance through the voluntary market.

The Knockout Punch: Unconventional Hurricane Deductibles

Even if you have hurricane insurance, you may still find yourself paying out more than you expected.

Some homeowner's insurance policies have a hurricane deductible that is a percentage of their home's insured value. This comes as a shock to some hurricane victims who, if they didn't read the fine print of their policy, may have thought the deductible would be the traditional $500 or $1,000 charge.

This hurricane deductible can just add to the long list of out-of-pocket expenses hurricane victims face.

Some victims of Hurricane Gustav will have to make those pricey deductible payments, as Louisiana is among 18 states that allows these types of deductibles.

Other states that allow these unconventional deductibles for hurricane and windstorm damage are:

  • Alabama;
  • Connecticut;
  • Delaware;
  • Florida;
  • Georgia;
  • Hawaii;
  • Louisiana;
  • Maine;
  • Maryland;
  • Massachusetts;
  • Mississippi;
  • New Jersey;
  • New York;
  • North Carolina;
  • Rhode Island;
  • South Carolina;
  • Texas;
  • Virginia; and
  • Washington D.C.

Louisiana Insurance Commissioner James J. Donelon told USA Today that his office has received a "steady stream" of inquiries from homeowners affected by Hurricane Gustav about how the hurricane deductibles work versus the standard $500 or $1,000 deductibles they were accustomed to paying.

He further said that the hurricane deductibles bring in big money for the insurance agencies. Donelon used his own home as an example, saying that his home was insured for $200,000 and it sustained $24,000 in losses after Hurricane Katrina. His insurance policy had a 2 percent hurricane deductible.

"[The deductible] wasn't 2 percent of my $24,000 loss," Donelon said in the USA Today article, "It was 2 percent of my total insured value so that my deductible ended up being $4,000."

Donelon also told the paper that since Katrina, his insurance company increased their statewide deductible to 3 percent of the insured value and increased the value of his home to $300,000.

So What Can You Do To Protect Yourself?

The best way to protect yourself from insurance coverage surprises is to know your policy. Before you purchase an insurance plan, review all the fine print with your insurance agent and make sure you fully understand what you are-and aren't-signing up for.

If you already have homeowner's insurance, take the time to sit down and review it. Ask yourself whether you have appropriate coverage for your needs. Look over the small print and contact your insurance agent if you have questions about coverage. Don't risk assuming that you're covered for certain events.

If you've recently remodeled or updated your home, don't forget to call your agent to update your insurance and confirm that you have adequate coverage. Your insurance needs may change and it's important to keep up-to-date with your insurance.

Taking a few hours to review your policy is well worth the time when you consider the potential price of putting it off. Don't wait for a total or unexpected loss to happen.

No matter how much you may try to protect your home, sometimes you can be surprised by the insurance company's response to your loss claims.

Many insurance companies have unlimited resources to spend time looking for legal loopholes. Homeowners sometimes fall victim to their less-than-attractive tactics-whether they are legal or not.

If you think that you have been wronged by an insurance company, don't hesitate in contacting a personal injury attorney who will fight for your rights and protect your assets.

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