Personal Finance

Are you covered for a flood? It's time to check any risk for summer storm damage

Key Points
  • Nine to 15 named storms are expected, with four to eight of them developing into hurricanes.
  • Last year, Hurricane Florence caused $24 billion in damage, while Hurricane Michael left $25 billion worth of destruction in its wake.
  • Homeowners should take note of their hurricane deductible, as well as evaluate their risk for flooding — which would require a separate policy.

As the nation's heartland endures heavy rainfall, catastrophic flooding and deadly tornadoes, homeowners elsewhere shouldn't assume they are out of harm's way. Now is the time to evaluate any risk for potential summer storm damage.

The Atlantic hurricane season runs from June 1 through Nov. 30. And although the National Oceanic and Atmospheric Administration predicts a near-normal season, it nevertheless expects nine to 15 named storms (winds of 39 mph or higher).

Of those, four to eight could become hurricanes (winds of 74 mph or higher) and include two to four major hurricanes (winds of 111 mph or higher).

Mark Wallheiser | Getty Images

In other words, people who live in areas affected by hurricanes could be in a major storm's path at some point over the next six months. And if they haven't evaluated whether they're covered for the potential cost of rebuilding after a disaster, now's the time to do it.

As temperatures rise and more moisture is held in the air, massive storms — some of which stall and dump torrential rainfall — have become more frequent in recent years.

Last year, Hurricane Florence caused $24 billion in damage when it battered the Southeast in September, dumping nearly 36 inches of rain in some spots in North Carolina and causing widespread flooding and wind-related destruction. Hurricane Michael hit the panhandle of Florida in October, leaving $25 billion worth of damages in its wake.

Five costliest U.S. hurricanes on record

Name Year Cost
Katrina2005$161 billion
Harvey2017$125 billion
Maria2017$90 billion
Sandy2012$71 billion
Irma2017$50 billion

Source: Source: NOAA

"Flooding is the number one disaster threat," said Lynne McChristian, non-resident scholar for the Insurance Information Institute. "Pay attention to what's happening elsewhere and realize it could be you."

Here are some tips for making sure you're financially prepared for hurricane season.

Check your hurricane deductible

There's a good chance your homeowners insurance policy has a hurricane deductible. In 18 states and Washington, D.C., it's a given. In others, it depends on your policy.

Either way, that deductible typically ranges from about 1 percent to 5 percent, depending on the specifics of your insurance contract. Some homeowners might opt for an even higher deductible if it's available.

It's important to note that the percentage is based on your insured value, not the damage caused. So if your home is insured for $200,000 and you have a 2 percent hurricane deductible, you'll pay $4,000 whether the damage is $20,000 or $200,000.

This means you need a plan to cover your share in the aftermath of a disaster.

"People should never take a higher deductible than they can afford," McChristian said. "Now's a good time to look at it and make sure you're comfortable with it."

Rising Risks: Hurricanes and Housing
Rising Risks: Hurricanes and Housing

Prepare for flooding

While most homeowners' policies cover wind damage, they generally exclude flood damage. Yet floods are often what cause the most destruction.

"People are suffering flood damage in many parts of the country that never had it before and never thought they were vulnerable," McChristian said.

For coverage, you'd need flood insurance through either the federal National Flood Insurance Program or a private insurer. Be aware, however, that there are coverage exclusions and limitations.

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For example, a government flood policy won't cover all of your belongings in your basement outside of things such as washers and dryers and water heaters. Separate insurance would be required.

If you think you might want a flood policy, don't wait for storm clouds to appear on the horizon. It will take 30 days to become effective.

Renters are vulnerable, too

Even if you don't own your home, your finances are still at risk if a storm barrels through and damages the house or building you live in.

Renter's insurance is an option for covering your belongings. It also can cover the cost of having to live somewhere else if you can't remain in your home after a storm.

Rebuilding an older home

If you have an older home and it is substantially damaged, it has to be rebuilt according to current building codes. Chances are they are stricter than when your older home was built.

"It can end up costing 25 percent to 50 percent more if you have to rebuild your home under a newer code," McChristian said.

Not surprisingly, there's an insurance policy for that. Called building ordinance and law coverage, it can cover the extra expenses involved in bringing your house up to code.