Insuring for the Expected & Unexpected
It felt like 2020 threw every surprise in the book at us. For Massachusetts residents, there was even an earthquake late in the year which turned out to be the strongest ever recorded for our state. Not many people in our region have considered the possibility of an earthquake-related loss in our area, but as last year kept showing us, NEVER say NEVER!
What may seem like a freak occurrence, however, gave many homeowners a much needed reminder to review what their insurance policy covers. Unfortunately, for Massachusetts' residents earthquake coverage isn’t automatically built into your homeowner's policies; it has to be added by endorsement. The good news is that the coverage is fairly inexpensive. Your agent can add it to your policy, often times for less than $100 a year. Remember to ask for the coverage, as it is not something that many agents include in their quote.
There are other natural disasters, however, that New Englanders do have a bit more experience with. If you live in a coastal area, like towns where the waterfront is just a short drive away, it may be time to review your policy to see if you have a hurricane, wind, or "named storm" deductible. In coastal regions, this deductible can be anywhere from 1% to 5% of your dwelling limit. This means if your home is insured for $300,000 then this deductible could be as high as $15,000, resulting from the fact coastal storms often cause such catastrophic damage. This is an expense homeowners in these areas need to be aware of and prepared for.
Floods are another disaster that we must adequately prepare for in the Massachusetts or Rhode Island area. Unlike other insurance, which takes into consideration the policyholders’ personal information to produce a rate, flood insurance looks solely on the characteristics of the property. If you are purchasing a home that is in a flood zone, your mortgage company will require you to purchase a flood policy. A flood policy is can be transferred from one owner to the next without having to be re-rated. Transferability of flood policies is important because over the years flood zoning in certain communities has been reclassified. If you assume the prior owner's policy you can take advantage of the lower premium from the lesser zoning.
Flood insurance used to only be available through government-backed FEMA. Recently, many carriers have entered into this market in the last few years. These companies are known as Private Market carriers. Be leery of these lower-priced policies. If a major flood loss occurs in your area, the company may become insolvent. You don’t want to find yourself (literally) up the creek without a paddle.