Susan Tompor: Your car and your basement might not be covered by insurance after a flood. Here’s why | Personal finance

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The aftermath of summer storms, such as those that have hit many parts of the country in recent weeks, often include many angry consumers who quickly find out what their insurance policies do – and don’t cover – in these types. emergencies.

Cars that end up being submerged in water, for example, might not be covered for such damage by insurance.

J. Robert Hunter, director of insurance for the Consumer Federation of America, said drivers will need to have full insurance coverage on their auto policy in the event of flooding or water damage. You would pay the deductible out of pocket, depending on your policy, but then you could see the insurance go into effect.

“Service varies a lot depending on the insurer,” Hunter said. “I would look for total loss if the engine was involved.”

Do you have full coverage?

However, many older car drivers may have ditched full coverage to save money on auto insurance. And if they face flooding, they’re really stuck.

“If you want your car to be protected against flooding, you need to have a comprehensive policy,” said Scott Holeman, director of media relations for the Insurance Information Institute, which represents the largest insurers that offer property and casualty insurance. for homes and automobiles.

Holeman noted that his father used to keep an old truck in a very rural area of ​​Kansas where he only had liability insurance on that truck – not comprehensive. But it was a vehicle that was only used occasionally and the family would not face any difficulties if the truck was damaged beyond repair.

He said people need to carefully assess what they can afford to do if a vehicle isn’t covered for a flood or other problem.

“What would you prefer to do? Have a whole new payment for a car? ” he said.

Comprehensive coverage would cover a variety of incidents including theft, natural disasters like a tornado, water damage, fires, falling trees and vandalism.

Again, your full cost of purchasing a new car will not be covered.

Allstate notes online: “Comprehensive coverage has a limit, which is the maximum amount your policy will pay for a covered claim. If your vehicle is totaled with water damage, Comprehensive Coverage helps pay to replace your vehicle, up to its depreciated value (called “actual cash value”). “

The general theory is that drivers may consider eliminating comprehensive coverage if the value of their car is less than the cost of such coverage. But you are often not able to give up this coverage if you lease the car or if the car loan is not paid off.

What to do to file a claim on a car

Remember, if you lease your car or still have a loan, you almost certainly have full coverage, as lenders and lessors demand, said Douglas Heller, insurance expert at the Consumer Federation of America. .

Nationally, about 78% of auto insurance policyholders have full coverage, according to the National Association of Insurance Commissioners Auto Insurance Database report 2020, which uses data from 2017.

In Michigan, nearly 86% of policyholders add full coverage. And most people will have to pay a deductible.

If your car or truck has suffered damage from the storm, Heller said, you need to be extra careful because the vehicle could struggle to operate and you could be injured by broken glass or branches.

Document damage with photos or videos from a safe distance.

When the damage is severe, Heller said, especially if the engine has been damaged, you risk having the claim paid as a total loss, which is the car’s current value minus the deductible. If this is the case, the insurer will usually take possession of your old vehicle.

He also said consumers should make sure the insurer pays for all of the various costs associated with buying a new car, including taxes and fees associated with ownership. You should also be pro-rated for the annual license fee (registration fee) you may have paid for the destroyed vehicle.

Respond to requests for information from your insurer. But also be very clear about your expectations for paying the full value of your claim, he said.

Get a second opinion from an auto repair shop you trust, Heller said, if you think the insurer is reducing your claim or reducing the costs of repairs.

“If the car is a total loss, be prepared to provide some evidence to support your point of view on the value of the car,” he said.

Research the market value of the car you were driving and any documentation (photos and service records) of the car before the damage was done.

“If an insurer is having trouble paying the full value of the claim, you should file a complaint with the Department of Insurance and Financial Services,” Heller said.

In some cases, a consumer may have to consider seeking legal representation if the business does not make a fair payment.

What happens to what you lost in the basement?

Often times people think they are covered for flood damage when they are not. It is only when there has been massive water damage that many people get a close-up view of the complexity of the cover.

The first step is to take the time to review your insurance policy, if you are able to find it, and discuss what is covered with your agent. It is good to have the policy number and other relevant information handy.

Experts say it’s best to let your insurance agent know if there is water damage to your home or other structure to determine what coverage is available. Don’t necessarily assume the damage was caused by flooding.

“Consumers should not simply claim that the damage is due to flooding, as there may be additional causes of water damage, such as a sewer back-up or a failing sump pump, which may be covered by the police, “according to advice from the Michigan Department. insurance and financial services.

What are the good first steps?

Don’t wait to clean a basement. You want to try to clean and protect your property before you can even contact an insurer.

Take photos or videos of damaged property, but be aware that much of your personal property may not be covered. Even so, you want to document the loss. Some experts recommend that you don’t want to get rid of big ticket items until the insurance company tells you to.

The immediate goal after a disaster is to protect your property and prevent other problems, such as mold build-up. Keep documents and receipts for all supplies purchased to protect property.

Experts say you want to cover or cover a damaged window or roof, for example, or replace a broken lock as soon as possible to minimize future damage.

How to avoid getting ripped off

Another unfortunate reality of any crisis is that crook artists may try to get a “good deal” because they are in the neighborhood.

Among other things, the Better Business Bureau cautions, “Although most contractors follow the law, be careful allowing someone you don’t know to inspect your roof and other areas of your home. An unethical contractor can actually cause harm to get work.

And the BBB is warning you that you might think you’re dealing with a local business when you really aren’t.

Sometimes the so-called storm chasers offer to pay substantial sums to local construction companies to use the company’s established name, reputation and phone number.

“They masquerade as a local business, collect the insurance money and then move on, leaving the real business to deal with unhappy customers due to poor manufacturing, unfinished work, or unfinished warranties. fulfilled, “said the BBB.

Understanding flood coverage

About 27% of insured homeowners nationwide said they had flood insurance, a record, according to a July 2020 survey for the Insurance Information Institute. This is up from 13% in a survey in 2018.

And 24% of Midwestern respondents said they had flood insurance.

But that same study notes that the latest national figure is higher than estimates from the National Flood Insurance Program, indicating that “homeowners may not fundamentally understand what flood coverage is and how it works.”

Here’s the deal: Flood damage is not covered by standard homeowner and tenant insurance policies.

But there are some insurance policies, including federal flood insurance, that homeowners may have purchased to cover flooding or water and sewer backups resulting from storms or other natural disasters.

The National Flood Insurance Program offers two types of flood insurance coverage: real estate, which would cover your actual home and things like electrical and plumbing, and personal property, which helps cover. what is inside such as furniture and clothing. The NFIP recommends purchasing both types of coverage.

Federal flood insurance program coverage typically takes 30 days to take effect, experts say. But there are a few exceptions, for example if you buy flood insurance while you take out, increase, extend or renew your mortgage. Or if you change your flood insurance coverage on your insurance policy renewal bill.

The National Flood Insurance Program notes, “Just 1 inch of water can cause $ 25,000 in damage to your home. “

True, the cost can be lower or higher depending on your home.

“People are increasingly aware that even if they are not in a floodplain, there is a risk of flooding,” said Holeman of the Insurance Information Institute.

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