Homeowners' insurance is meant to protect us in case something bad happens. Over the years, that's what we've come to expect from our homeowner's insurance. But what if it is the most expensive disaster in U.S. history? What if the disaster also took out the home and office of your insurance agent?
After Katrina hit the Gulf Coast, this is what happened to a lot of customers, homeowners insurance agents, and companies. Due to the storms, many insurance agents' homes, offices, and claims centers were in the same situation as their clients. So what happened? They set up "offices" in tents and trailers that could be moved. Then Hurricane Rita blew these temporary offices away, and the agents and companies set them up again. People in the area were able to talk to each other through these temporary shelters. People from the area would stop by to ask questions, meet with their claims adjustors, or just talk with their neighbors about what was going on. Extreme situations forced people to act in unusual ways. For example, some agents filed claims for their clients without even talking to them, just to get the claim "in the queue." Allstate customers could file claims with any agent in the country, and the company set up a priority line to help. They sent an email to agents in the areas near the disasters, asking them to "spread the word" to their colleagues in the affected areas. Large insurance companies like State Farm and Allstate, which handle claims for the National Flood Insurance Program, even used satellite images to figure out how bad the damage was in some completely flooded neighborhoods.
Lessons Learned: The thousands of policyholders who are still waiting for their claims to be paid can teach us a few things about how to deal with disasters in the future. As soon as you can, do what you can to stop more damage to your home, such as putting a tarp on the roof you can. If you can find one, you can hire a contractor. Most of us would rather do that than climb on our roofs. Don't fix anything until you've seen or talked to an adjuster. Also, keep your receipts because you'll need them to show that you paid for things that can be reimbursed later.
What is covered by homeowners insurance?
Usually, your homeowner's insurance will help pay for extra costs of living for up to 12 to 24 months while your home is being fixed. But home insurance usually doesn't pay out until they're sure you have a valid claim. After Katrina, many insurance companies made an exception and gave out enough money to cover two weeks' worth of extra living costs to anyone who lived in an area that had to be evacuated. Under the personal property part of their homeowner's insurance policies, some companies even gave small advances on the contents of the home.
If you have to wait for your check, it helps to have cash in a bank account or money market fund that you can get quickly. Keeping cash at home isn't a good idea because if your house burns down and you can't get to your cash, most homeowner's insurance policies only cover $100-$200 in cash, whether it was stolen or burned up in a fire. Your goal should be to have enough money for emergencies to take care of your family for at least 2–4 weeks. During a disaster, it might be hard to find a nearby bank where you can get cash. It might be better to have debit or credit cards from a bank that serves a state or the whole country.
Your biggest problem with getting your claim taken care of may be that you don't have enough or the right kind of homeowners insurance. Most good homeowner's insurance policies cover up to 120 percent of your home's coverage limit. You should talk to your agent at least once every two years about the number of homes you can own. Flooding is not covered by homeowner's insurance, but you should talk to your agent again about this.
If your homeowner's insurance doesn't cover enough, you may be able to get money from FEMA or a disaster-assistance loan from the Small Business Administration (SBA). Homeowners can borrow up to $200,000 to rebuild and $40,000 to replace personal property at very low-interest rates for up to 30 years.
