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Homeowners insurance is supposed to protect you in case of disaster. But what if the disaster is the costliest in U.S. history? And what if your insurance agent's home -- and office -- were destroyed in the deluge?
After his home in Bay St. Louis, Miss., was flooded, the only items David Treutel could salvage fit in a small closet under the stairs of the house his family is renting in Mobile, Ala. But David, an independent insurance agent, and his wife, Angelyn, drive two hours each way every day to meet with clients in Bay St. Louis. At first, the Treutels pitched a tent. When Hurricane Rita blew away the tent, they moved into a trailer.
Nearly two months after Hurricane Katrina, about a hundred people a day were still walking into the Treutels' makeshift office to ask questions and meet with adjusters. And extreme circumstances have dictated unconventional responses. For example, David filed claims for all of his clients, so "everyone was immediately in the queue," he says. State Farm allowed its customers to submit claims through any agent in the country and scoured evacuation shelters to find policyholders.
By mid October, a few claims had already been paid through nontraditional channels. State Farm, one of the companies that services claims for the National Flood Insurance Program, used satellite imagery to determine damage in some neighborhoods that were entirely flooded.
Waiting game. The rest of us can learn a few lessons about coping with future disasters from the thousands of other policyholders who are still waiting. As soon as possible, take steps to prevent further damage to your home -- such as covering the roof with a tarp -- but hold off making repairs until you see an adjuster. And keep the receipt for that tarp.
You can generally expect homeowners insurers to help pay for additional living expenses for up to a year or two while your house is uninhabitable. But they usually pay only after an adjuster inspects the property. After Katrina, many insurers made an exception, automatically distributing enough to cover two weeks' worth of additional living expenses to anyone in an area subject to mandatory evacuation. Some companies also gave small advances on claims.
If you have to wait to get your check, it helps to have cash that's easily accessible in a bank account or money-market fund. Or stash some extra money at home. Aim to have at least enough in a liquid account to cover your insurance deductible, which can be 2% or more of your home's coverage in high-risk areas.
Your biggest problem may turn out to be not having enough insurance, especially if you must buy scarce building materials or bulldoze a building. Most policies will pay only up to 120% of your coverage limit, so recalculate rebuilding costs every few years. Your agent can help. Or, for $14.95, you can use a tool at Kiplinger.com to get the building-cost estimates that insurers use. Homeowners policies don't cover flooding, but you can buy insurance at www.floodsmart.gov.
If your coverage falls short, you may qualify for money from the Federal Emergency Management Agency (FEMA) or a disaster-assistance loan from the Small Business Administration (such loans aren't limited to businesses). Homeowners can borrow up to $200,000 for rebuilding and $40,000 to replace personal property at 2.68% interest for up to 30 years. To apply, contact FEMA at 800-621-3362 or www.fema.gov.
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