Insurance Policies May Not Cover All Damage From Irene

Homeowners are bracing for damages as Hurricane Irene hits much of the Eastern seaboard this weekend, but many will discover, after the debris is cleared, that their insurance policy may not cover all the damage, the Wall Street Journal reports.

In recent years, not only have many insurers reduced the number of policyholders they insure in high-risk areas, but some have raised deductibles for hurricane-related disasters. Homeowners also may be underinsured if they did not report improvements and additions to their insurer.

As of late Friday, Kinetic Analysis Corp., which estimates the impact of natural and man-made hazards, was forecasting about $7 billion in damages from Hurricane Irene, with insured losses being about half of that. By comparison, Hurricane Katrina in 2005 resulted in $62.2 billion in insured losses alone, according to Munich Re, a reinsurance company.

Homeowners should contact their insurance agent immediately after any damage occurs. They will have to fill out a claim form detailing the damage that occurred, and in many cases they will have to wait for the insurance company to send an adjuster to review the damage.

Although it may be too late to buy coverage for Hurricane Irene, this is what homeowners can expect from their insurer:

Wind damage from hurricanes and tropical storms is covered under standard homeowner's policies. That includes broken windows, torn roofs and any interior damage from water falling into a home or wind-driven rain -- or if strong winds blow tree limbs or entire trees into a home, garage or shed.

Not all policies pay out right away. Over the past few years, more insurers have added hurricane deductibles to basic policies for homes on the East Coast.

When a hurricane results in wind damage to a home, the homeowner might first have to pay a hefty deductible -- often equal to one percent to five percent of the total amount the home is insured for, said Michael Barry, a spokesman for the Insurance Information Institute. For a home insured for $500,000, that could be up to $25,000. The highest hurricane deductible percentages are typically in areas that are more likely to incur damage from a hurricane or that have been hit by a hurricane in the past, he said.

Hurricane Irene also is expected to dump as much as 10 inches of rain in the Northeast and mid-Atlantic regions, and residents are being told to expect flooding.

Traditional homeowner's policies do not cover floods, which are defined by insurers as water that rises from the ground, including tidal waves. To get reimbursed for water damage, homeowners would need flood insurance, which is largely provided by the federal government but can be purchased through an agent or insurance company.

The average flood insurance premium is about $600 a year, but it can go up to nearly $6,000 for the highest risk coastal properties, according to the National Flood Insurance Program. The maximum coverage provided by the federal flood insurance program is up to $250,000 for a home and up to $100,000 for contents.