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Disasters Happen. Are You Covered?

Natural disasters happen, and over the years Minnesotans have had their fair share of storms, floods, and tornadoes. You never know when you could suffer property damage or loss from a flood, tornado, wind, hailstorm, or fire.

There are many things in life you cannot control, but you can control your ability to recover from unforeseen events by having adequate insurance coverage.

Government assistance becomes a reality in only 10 percent of all disasters. Therefore, relying on government for recovery assistance is not a prudent plan for protection for yourself and your family. Federal disaster declarations are only awarded in large-scale disasters, and when they are awarded, assistance is usually in the form of low-interest loans, not grants.

Manage Your Risks 

Meet with your insurance agent annually or as needed to ensure your insurance coverage is adequate to protect you and your family against loss. Take into account any recent changes or additions to your property or surrounding area.

Read and Understand Your Insurance Policies

Many wait until after they experience a loss to understand their coverage. Unfortunately, these decisions cannot be undone and they will directly affect your ability to recover from a loss. Review your existing insurance coverage and figure out where your "gaps" are.

  • Has your property changed since you purchased the coverage? Your insurance agent will be able to assist you in making sure your coverage has kept pace with the value of your home.

  • Is your home insured for a least 80 percent of its replacement value? If you have less coverage, you may not be fully reimbursed for partial damage.

  • Are your possessions insured for actual cash value or replacement cost? Many policies provide compensation for the contents of a home on an actual cash basis rather than replacement cost basis. Talk with your agent to determine whether purchasing replacement coverage is worth the extra premium.

  • What is the liability coverage limits on your policy? Are they high enough? If you are unsure, discuss it with your agent. No policy covers everything and coverage is subject to the policy's limitations, deductibles, and exclusions. Law does not mandate property and casualty insurance coverage. It is a good idea to read your policy thoroughly and be familiar with your individual coverage benefits and limitations.

Homeowner's Insurance and Renter's Insurance Come in Several Different Forms

The number of perils you are insured against will affect the cost of your insurance. Comprehensive coverage is the most common form of coverage. Homeowners' insurance does not, in any case, cover loss from flood, earthquake, war, or nuclear accident.

It is important to keep your coverage consistent with your needs and changes to your property. Many insurers require homeowners to insure their homes for at least 80 percent of the replacement costs in order to avoid a penalty for partial losses.

If you are insured for actual cash value, the insurance company will pay you for a covered loss based on the value of the item or repair minus depreciation. If you are insured for replacement cost, the insurance company will pay you for a covered loss, based on the value of the item or repair without subtracting for depreciation.

Actual Cash Value vs. Replacement Cost Coverage

Your roof blows away in a storm and all the shingles need to be replaced. The cost to replace them is $10,000. The shingles are 10 years old, but they should have lasted for 20 years under normal conditions. Therefore, they have depreciated by one-half of their full value.

Under an actual cash value policy, you would only be paid $5,000 for a loss, minus any deductible. Under a replacement cost policy, you would initially receive $5,000 for the loss of the roof. Then, after having it repaired or replaced, you would submit the bill to the insurance company for the balance, not to exceed the amount determined by the insurance company to return your roof to its original condition.

Plan Now for a Future Claim

No one ever knows for sure when a storm or other peril will strike. There are several steps you can take to ensure that you will be fully compensated for your loss as well as make the insurance claim filing process easier and faster after a disaster.

  • Inventory your household furnishings and other possessions, including model and serial numbers, and estimate their cash value or replacement value, depending on the type of coverage you have.

  • Do not overlook items used seasonally or infrequently, such as special china and silverware, holiday decorations, summer and winter sports equipment, carpentry tools and baby-care furnishings.

  • Fully document the value of collectible items such as jewelry, coins, stamps, guns, tools, antiques, and art, etc. A standard policy limits the amount of coverage for these items so make sure your policy covers their full market value.

  • Photograph or videotape each room of your home and your belongings.

  • Save receipts for big-ticket items.

  • Store all inventory information off your premises, such as at work or in a bank safe deposit box.

  • Keep readily at hand the telephone numbers of your insurance agent, your insurance company's local claims office, and its home office.

Insurance Policy Options

There are several forms of homeowners' insurance that cover damage done to you home or property from various natural disasters. Here is what you need to know.

The BASIC form covers the following disasters:

  • Fire and lightning
  • Vehicles
  • Windstorm or hail
  • Smoke
  • Explosion
  • Vandalism or malicious damage
  • Riot or civil commotion
  • Theft
  • Aircraft
  • Sonic Boom

The BROAD form covers all the perils covered in the BASIC form plus:

  • Glass breakage, which is a part of a building
  • Sudden and accidental tearing apart, cracking, burning or bulging of steam\hot water heating system
  • Collision upset or overturns
  • Falling objects
  • Freezing of plumbing, heating system or appliance
  • Sudden and accidental damage from artificial electrical current
  • Weight of ice, snow or sleet
  • Collapse of a dwelling or part of a dwelling
  • Accidental discharge or overflow of water or steam from within plumbing, heating or air conditional system

The SPECIAL form provides comprehensive coverage for homes for all perils except:

  • Flood
  • Earthquake
  • War
  • Nuclear accident
  • Mudslide/landslide 
  • Other disasters specifically excluded in your policy

Contents and personal property is covered for all perils named in the broad form.

The COMPREHENSIVE form covers your home and personal property for everything that is not specifically excluded, except:

  • Flood
  • Earthquake
  • War
  • Nuclear accident
  • Mudslide/landslide 

Flood Insurance

Insurance protection for floods is not provided under homeowners or commercial insurance policies. Flood insurance is, however, offered by the federal government through the National Flood Insurance Program (NFIP). It is available to every resident of communities that participate in the NFIP, regardless of whether the structure is located in a mapped flood plain. Flood insurance can be purchased through local insurance agents or the NFIP directly. There is a 30-day waiting period before coverage under a new policy takes effect.

You can consult your insurance agent or call the NFIP DIRECTLY AT 800-611-6123 (ext. 901) to request information or purchase a policy. Flood insurance is much more affordable than disaster aid, which usually comes in the form of a loan. The average disaster loan payment is about $140 a month for 18.5 years, compared to the national average flood insurance premium of a one-time yearly payment of $400.

Some homeowner insurance companies offer limited coverage in the form of a rider on your homeowner's policy for loss caused by water that backs up through sewers or drains. This coverage, in most cases, does not apply if the damage is due to flooding or seepage/leaking through basement walls.

For more detailed information about flood insurance, visit What Every Minnesotan Should Know About Flood Insurance.

Even if fully insured for all perils, some losses will not be covered:

Cost of tree and debris removal when structures unharmed
Undamaged property, siding or shingles
Damage to property not involving structures

If you experience a loss, get the claims process in motion. Contact your agent immediately to report a loss covered by auto, homeowners, or flood insurance. The agent will prepare a Notice of Loss form and an adjuster will be assigned to assist you. Follow the instructions given to you by claims personnel. Since there will be many people in need of help, anything you have done before the disaster to prepare for a loss will be to your benefit.

Keep your insurance policy number handy. The claims process always goes faster when the adjuster, the agent, or the service center operator does not have to search their records for information about your policy.

Keep your claim number handy. When you file your claim, the insurer will give it a number. Future conversations with insurance personnel will go quicker if you know your claim number.
Take notes. Start from the beginning to keep a log of the people you spoke to and when, as well as a summary of your conversation. If possible, photograph the inside and outside of the premises, showing the damage and surrounding area.

Figure out extent of damage. Separate the damaged from the undamaged property and put it in the best possible order for the adjuster's examination. If possible, protect the property from further damage.

Wait for the adjuster to arrive. Do not call everyone to permanently repair or replace your loss without first getting instructions from your adjuster, because your insurer's visual inspection of your loss may be necessary before covered repairs are undertaken. Do not throw away damaged property until your adjuster advises you. If your home is damaged, make only temporary repairs until a claims adjuster looks at the damage. Making permanent repairs before the adjuster's inspection could trigger a denial of your claim.

Get your questions and complaints answered immediately. Many "problems" with insurance are not problems at all, but misunderstandings. Insurance is a big expense and you have a right to know you are getting what you paid for. Again, you can expedite the process by having your policy and claim numbers handy along with an accurate summary of communications that have transpired to date.

If you have a dispute with your insurance company about the amount of damage or the cost of repairs, first try to negotiate a settlement with your insurance company. Most policies have a clause that allows you to ask for an appraisal of the loss. You will be able to select an appraiser, the insurance company will select one, and a third will be mutually agreed upon. Together they will appraise the loss and decide on a value. Your policy will have more details on this procedure. You can also contact the Department of Commerce for guidance.

Who Can Help Me?

Minnesota Department of Commerce
1-800-657-3602 or 651-539-1600

Insurance Federation of Minnesota
Help Line

National Flood Insurance Program (NFIP)
1-800-611-6123 (ext. 901)