Disaster Prep Wednesday: Buy that Insurance!

Look, there are whole bunch of non-profit and governmental agencies that will rush to the site of a disaster and provide short-term aid - food, water, and some other gifts - but none of them - no, not the Red Cross, not FEMA, not the Baptist Men, the Salvation Army or any of the others - will ever come close to restoring you back to the situation you were in before the disaster. For that, you really, really need to have purchased insurance. The very purpose of insurance is to put you back as you were before the disaster:

Homeowner's insurance is designed to offer you protection in case of loss or damage to your home and property. A typical homeowner's insurance policy includes protection for both the house and the property that it sits on, as well as other buildings or structures on that property. Most homeowner's insurance policies also provide protection for any items within the house or other structures. In the event of damage or theft, you are reimbursed for the cost of repairs or replacement as well as the time you must spend away from home while repairs are being done.

If you don't own your residence, you should buy "renters insurance":

Many renters who go without are under the mistaken impression that their landlord’s policy covers their possessions.

“As a renter, if your personal property is damaged, you’d have to have a renter’s policy to get coverage,” said John Capuano, an associate insurance examiner with the New York State Department of Financial Services. “The landlord’s policy is not going to cover your damages.”

Many landlords will not lease a unit unless the prospective tenant offers up proof of renters insurance.

I've been on a couple of Red Cross apartment fire responses where that has been very comforting to the tenants whose apartment just got turned into rubble. These policies are pretty inexpensive, too. Nice to know that big screen television and various computers, game consoles and mattresses can be replaced. A little planning ahead works wonders.

However, unless you add "replacement value" coverage, you will only receive a dollar amount covering what you might have paid for your stuff. Thus, as set out here:

When you file a homeowners claim, the insurance company calculates how much to pay you by evaluating the cost to replace your property with new property of the same kind and quality. But here's the critical distinction: If your policy covers your personal property (your home's contents) for its actual cash value, the insurance company deducts depreciation from your personal property's overall value before arriving at a figure.

Your check will usually be less, sometimes significantly less, than the amount it will cost to restore, repair or replace the damage or loss. However, if you have replacement cost coverage, the insurance company will pay what it costs to repair or replace your damaged possessions at today's prices without deducting for depreciation.

While actual cash value language is standard, most insurance companies offer replacement cost coverage as an option.

Renter or owner, depending on where you live, you might find it a really good idea to also have flood insurance because most home/renter policies do not cover floods. In addition, if you live in an earthquake zone, you might want to look at adding "earthquake coverage". People who live in hurricane and tornado prone areas may need special "windstorm coverage":

A special type of property-casualty insurance that protects policyholders from property damage caused by windstorms. Windstorm insurance is usually offered in the form of a rider on a standard casualty insurance policy through the extended coverage endorsement. It is one of the subsets of storm insurance.

Whether or not you may have a need of these forms of special coverage will very much depend on where your property is.

In North Carolina, for example, the Department of Insurance has a "Coastal Property Insurance Pool":

The Coastal Property Insurance Pool is defined by the North Carolina General Statutes as the "Market of Last Resort"; therefore, it is highly recommended that property owners attempt to obtain insurance in the standard market.

Other coastal states may have similar programs. It's worth checking if you have one of those cool beachfront houses. Renters can get windstorm policies, too.

If you are uninsured, you may only get the limited amount of help that the Red Cross and other NGOs and FEMA may be able to offer - which is meant to help for a short time only.

So, buy that insurance!