Isabel triggers insurance-policy checks

Preparing for tropical storms and hurricanes is an almost annual rite for William and Florence Rowe.

The Wilmington, N.C., couple has had to contend with four hurricanes in the past decade, and that's also meant learning the intricacies of dealing with their insurance company.

"We've been very lucky overall," says Ms. Rowe. "We've only had to deal with some relatively minor repairs from hurricane Floyd in 1999. And our insurance company dealt with us fairly and in a very timely fashion."

The Rowes, who suffered some roof and driveway damage from Floyd, last week readied their home for hurricane Isabel, a Category 2 storm that descended upon North Carolina and other areas along the East Coast.

Getting ready meant not only preparing their home for heavy winds and torrential rains, but also making certain that their insurance policy was in order. That type of preparation is exactly what most insurers recommend. Aside from simply "battening down the hatches," insurance - whether it's homeowner's or renter's - is about your only protection from hurricane-related losses.

Still, as some neighbors of the Rowes found out after hurricanes Fran and Floyd, a simple homeowner's policy may not be enough.

Most standard policies cover only the actual value of personal property, not what it costs to replace it. And unless you have a separate flood policy, only hurricane-related damage from wind or rain is covered - not rising water.

According to statistics from the Federal Emergency Management Agency (FEMA), floods cause more destruction than any other type of disaster in the United States.

As a result, flood insurance is expensive and can be offered only as the result of subsidies to private companies from the National Flood Insurance Program.

Since a flood policy does not take effect until 30 days after you buy it, homeowners on the East Coast shopping for insurance ahead of hurricane Isabel found themselves left out.

As of last Tuesday, several of the biggest home- and auto-insurance companies, including State Farm, Allstate, and Nationwide Financial Services Inc., stopped issuing insurance to those in the direct path of the storm.

"Halting insurance-policy issuance ahead of an imminent catastrophe is standard industry practice," says Jeanine O'Donnell of State Farm's regional office in Dover, Del. "It's a way to avoid unnecessary risk."

Even when a storm is not on the horizon, claims have become so expensive that homeowners in the most vulnerable Southern states are finding it increasingly difficult even to find private-agency insurance.

"In some coastal counties, it's futile to even try to get [private] coverage," says Scott Johnson, executive vice president of the Florida Association of Insurance Agents. "Florida's last-resort insurance pool is now covering more than 500,000 customers."

In Massachusetts, although homeowners in coastal areas are typically covered for wind-related storm damage, the Massachusetts Property Insurance Underwriting Association does not cover the most common type of hurricane damage: flood damage.

With hurricane season running through November, insurers are urging customers to take a few steps now that may make filing a claim a lot easier later on.

"Start taking pictures or videotape of your home and anything of value in your home," says Ms. O'Donnell. "If you can't do that, make an inventory of any prized possessions and keep that - along with any receipts and appraisals - with you should you have to evacuate. In the aftermath of a hurricane, having basic information about your policy and the contents of your home can help make the claims process easier and faster."

O'Donnell also recommends that homeowners make a quick check of their home's exterior - clearing clogged drain gutters and looking for loose shingles.

And if you need to evacuate your home, shut off all water and gas valves. In that case, if a pipe breaks, you won't come home to a flood.

When filing a claim, many homeowners could be in for an unpleasant surprise. That's because once a storm is declared a hurricane, homeowners pay higher deductibles.

While the standard homeowner's policy deductible is often $500 or $1,000 for damage claims, homeowners face deductibles ranging from 2 percent to 5 percent of the replacement cost of rebuilding a home - not the total appraised value - should a hurricane strike.

With the higher 5 percent deductibles, it's clearly in homeowners' interest that wind speeds remain below hurricane strength. For example, if a $200,000 house is wiped out by a hurricane, the owner's out-of-pocket cost to replace it would be $10,000.

Even if a hurricane results in tens of millions of dollars of claims, insurance experts say the industry has more than enough money to handle it. According to the National Association of Independent Insurers, property and casualty insurers have roughly $290 billion in capital.

That means homeowners shouldn't worry that bills for damage won't be paid in the event of a busy hurricane season.