Despite predictions for relatively few hurricanes this season, it's still a good idea to assess your financial readiness.
For this year's Atlantic hurricane season, which runs through Nov. 30, the National Oceanic and Atmospheric Administration has predicted a "below-normal" six to 10 named storms with as many as four of those reaching hurricane status, the agency said. While August is often the peak month, big storms can arrive late in the season.
Hurricane Sandy, which killed more than 70 people and caused at least $50 billion in damage in the U.S., formed in late October of 2012. And the U.S. National Hurricane Center is reporting that Hurricane Joaquin, strengthened into a Category 3 hurricane Thursday morning with winds up to 125 mph, and could turn toward the U.S. East Coast in the coming days.
As Robert Hartwig, president of the Insurance Information Institute, points out: It only takes one bad storm to derail your wedding, disrupt your vacation or damage your home. Hartwig and the NOAA note that in another "below-normal" season, 1992, the first storm of the year—Andrew—turned into a Category 5 hurricane that remains the second costliest hurricane on record. He warns not to be lulled "into a false sense of security," especially with about two months left in the season.
Here's what you can do to prepare.
It's worth checking for natural disaster gaps in coverage annually, whether you live in an area at risk for hurricanes or for other disasters, such as the flooding in Texas or wildfires in California. One of the most common policy problems: a lack of flood insurance. Most policies cover wind damage from hurricanes and other storms, but water damage from storm surges and floodwaters is typically excluded.
"That's a separate policy," said Peter Kochenburger, executive director of the University of Connecticut's Center for Insurance Law. Coverage can be purchased from the National Flood Insurance Program or several private providers, but you'll need to have planned ahead — it takes 30 days to go into effect. "You cannot call when a storm is bearing down," said Hartwig.
It's also important to make sure you have adequate coverage based on your home's value and estimated cost to rebuild. You might not, especially if you've made improvements; the cost of building materials have increased, said Hartwig. If your coverage is less than 80 percent of the home's replacement value, many insurers will reimburse you only for a portion of damages.
Check too to see if your homeowner's policy has a separate deductible for hurricane and windstorm damage, said Kochenburger. It's often much higher than the deductible for other types of damage, and can amount to 1 to 5 percent of your home's value. "Do you have something like that and if so, are you comfortable with it?" he said. It may be worth shopping competitors, or stashing a bit more in an emergency fund to bridge that gap.