Whether you’re a homeowner or a renter, living anywhere near the Gulf of Mexico means you need to prepare ahead for storm season. That doesn’t just mean getting a generator and stocking up on food essentials. If you’re into going above and beyond (kind of like us!), you’ll want to do the smart thing and check on your home insurance policy so you’re not left high and dry!
We sat down with Ken Robinson of MAKZ Insurance to get the scoop on why it’s so important to examine your insurance policy as soon as possible. So why do you really need to check out the details of your home or renters policy right away? According to Ken, here’s exactly what you should know (and do) about your renters and homeowners insurance policies before the official start of hurricane season!
#1: Insurance Carriers Prepare Early for Storm Season—Even if You Don’t
Hurricane season in the Atlantic Basin (which includes the Gulf of Mexico where the great state of Texas extends) *officially* lasts from June 1 to November 30 each year. But, as anyone living in Texas, Florida, or Louisiana knows, a tropical storm can strike at any time.
In fact, the first hurricanes of 2020 actually began in May:
A survey by the American Psychiatric Association found that Americans are the most anxious about finances, safety, and health. Moving can trigger anxiety because it impacts your finances and safety.
If you think insurance companies don’t track weather reports, think again. So instead of waiting until the eleventh hour of a storm forecast, there are quite a few reasons you shouldn’t wait to do an insurance check-up... More obvious factors include protecting your major investments (like your house, rental property, and your personal items.) The less obvious reason is that all insurance carriers set cutoff dates when there's a named storm off the coast.
Yes, this does vary by the insurer to some degree. However, if you don’t prepare early, you could end up waiting too late to get or update your homeowner’s or renter’s policy.
#2: You Can’t Get Homeowners or Renters Insurance During Hurricane Season
Let’s clear something up: While Ken verifies that you can get homeowners or renters insurance at any time—remember, official hurricane season starts June 1—there is a catch when it comes to impending storm warnings… “You cannot get insurance when a named storm is so many miles away from the coast,” he says.
“So for instance, if you’re in the Houston or Galveston area, and a named storm is like, 100 miles off the coast… Most carriers shut down binding authority, which means that you can’t buy a policy at that time.”
Why the heck does this even happen? Insurance carriers operate off of their financial reserves to pay out claims, based on the number of clients. The companies could literally go bankrupt if they accommodated everyone who scrambles to get home or renters insurance due to a storm forecast. Then, they’d have to pay out MASSIVE amounts of claims all at once, based on the hundreds of thousands of new clients…
We’re talking in the millions to billions of dollars worth of damage that storms often cause. Imagine how quickly the industry would collapse if they accepted new clients every time a storm was miles away from the coast of a major city!
To protect their reserves, carriers set a cut-off date for purchasing last-minute policies. That’s why it’s critical to buy, change, or adjust your renters or home insurance policy before storm season even starts.
—Ken Robinson, MAKZ InsuranceTweet
“Don’t wait until it’s too late,” Ken warns, “because if you wait until the storm is 100 miles off the coast, it’s too late. Every carrier has their [own rules] and threshold of what they feel is their breaking point.” That goes for all types of property policies: homeowners insurance, renters insurance, flood insurance, and even auto insurance!”
#3: Storm Damage Isn’t Necessarily Covered by Your Homeowners Insurance
You should definitely check out what your deductible says on your declaration page specifically regarding storm damage. Perhaps you assume that coverage is automatically included, but that depends on a few things.
Some insurance carriers combine wind, hail, and named storms under one deductible, while others have three separate deductibles for each. All storms are typically covered by your policy unless you or your carrier exclude the coverage for some reason… Such as, where you live:
“There are parts of Galveston, and down the coast where you may have to get a separate wind policy because you’re too close to the coast,” Ken says, “But, for the most part, all homeowner’s policies cover wind damage, fire, and most storms.”
#4: Flooding Is Super Common During Storms, but Isn’t Covered by Your Renters or Homeowner Policy
One thing our team and Ken have noticed in plenty of discussions with new homeowners or people moving into storage, is the confusion over flood coverage. And, since it floods so easily in the Gulf Coast, Ken wants to end the confusion once and for all. Flood coverage is an entirely separate policy, which means you have to add it to your current coverage. Don’t assume that just because you have homeowners or renters insurance that you also have flood insurance. Make sure you check with your insurance carrier to verify.
#5: Your Policy’s Replacement Cost vs. Actual Cash Value Coverage Can Be Very Different
Your policy’s replacement cost vs. actual cash value (ACV) can be very different. Typically, under a basic renters or homeowners policy, your personal property is covered at ACV instead of replacement value. You can increase or upgrade this with your carrier, though. Here’s the difference between actual cash value and replacement cost when it comes to covering your damages:
This is the amount your item is worth, including depreciation over time. Whatever amount is not covered, you’ll have to make up the difference yourself.
To decide between keeping ACV or upgrading to replacement cost, Ken suggests that you:
- Get an appraisal if you’ve been in a home for a while (say, 10-15 years), or have had major repairs/renovations done.
- Take inventory of what you own. Using a receipt-tracking app or folder in your email is a great way to document when and how much you paid for each item. This way, you can decide which insurance option is best.
- Adjust your replacement cost/ACV policy limits through your insurer so you have solid coverage in case of a hurricane.
- Even renters may need to adjust their policy limits, especially if you own high-value items. You can also get a special endorsement for pieces like jewelry. The good news is you only really need to worry about your personal belongings
Replacement cost vs. actual cash value can be a little more complicated than what’s presented here. See more in-depth info in our previous post about the differences between replacement cost and ACV to help you determine how much you need (of either option) to protect your new home:
Wrapping Up
There’s nothing better than knowing your personal property is safe (or that you’ll at least be reimbursed if it’s damaged)… especially as we face increasingly stronger, more frequent storms here in Texas. Now that you know to start early, ensure you have the best renters or homeowners policy coverage for your needs before storm season! Get in touch with your agent to protect your home or personal belongings right away.
You can also contact Ken Robinson at MAKZinsurance.com for assistance with any confusing insurance details. Remember, if you’re already moving out or need storage due to storm damage, we’re always here to help you, too!