How Does Disaster Insurance Work?

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How Does Disaster Insurance Work?
How Does Disaster Insurance Work? (Image: http://www.geotimes.org/, http://publicsphere.worldbank.org/, http://www.hanna.ca/, http://www.calstatela.edu/)

Identification

Depending on what part of the country you live in, insuring your property against a natural disaster might make perfect sense, or it may not be worth the expense. As the majority of mortgage holders require a property to have home owner's insurance, most home insurance policies do provide some form of disaster protection. Knowing what's covered under your current policy will give you a good idea as to what type of additional coverage you may need.

Most home owner's insurance policies list an "All Perils" coverage provision. And while this may sound like disaster coverage, it doesn't cover anything and everything. A natural disaster occurs when there is extensive property damage as a result of a hurricane, flood, earthquake, landslide, tornado, or some other natural phenomena. If a hurricane destroys your home--and hurricanes are "excluded" in your policy contract--it won't be covered by insurance.

Function

For disasters that are covered, the company's insurance adjuster will draw up an estimate for the cost of the damages. How this person presents your claim can determine what gets covered and what doesn't. A thorough understanding of what your policy covers is needed in order to deal with the insurance company. Consulting with an insurance lawyer before dealing with the insurance company is a good idea.

Insurance adjusters base their cost estimates off of a program called Exactimate. Costs for materials and labor are figured according to market prices. The drawback here is simple. The demand and price for labor and materials goes up when a disaster strikes an area or region. Exactimate doesn't factor in this change in market price, so make sure the repair costs on the estimate match your region's current market prices.

Features

Disaster insurance also lists a provision for additional living expenses should you have to vacate your home while repairs are made. This needs to be listed on the adjuster's claim as well to ensure that any temporary housing expenses are covered. If there's a loss of power, any refrigerated food is covered, as well as the cost to have your electrical wiring inspected and repaired if needed.

For houses built prior to 1978, any claim calling for the replacement of walls, ceilings or air ducts should include a test to determine if asbestos materials were used in the construction. If asbestos is present, a complete removal of all asbestos-made materials is warranted, and the disaster insurance must cover it.

Claim Settlement

Depending on how widespread a disaster is, anywhere from hundreds to thousands of claims may be filed at once to the same insurance company. In cases like this, companies may be under a government imposed deadline to settle the claims in your region. When this occurs, the insurer will often make a rough estimate of your claim. You do have the option of scheduling to meet with the adjuster if this estimate doesn't cover your damages. In other cases, a company may offer you an on-the-spot settlement where they cut you one check for all costs. The check is issued right away. However, if you later find additional damage that wasn't covered by the settlement, you do have the option of reopening your case. Even though policyholders typically have up to a year to file a claim, its' better to get it in sooner than later.

Considerations

If you live in an area known for hurricanes or earthquakes, the price you pay for disaster insurance will be significantly higher than other parts of the country. While home owner's insurance does cover damages caused by a natural disaster, pay particular attention to the exclusionary statement on your policy. It will specify what's not covered under disasters. Purchasing an additional policy may be necessary to ensure the proper coverage for the area you live in.

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