Sandy’s Aftermath: Minimizing the Storm’s Costs

With insurance policies often surprising homeowners with coverage gaps, now is the time to protect yourself for the next big one.

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A flooded street between two casinos along the Atlantic City boardwalk prior to the arrival of Hurricane Sandy. (Click for more photos)

With superstorm Sandy leaving millions of people without electricity and restoration expected to take days, Americans already dealing with missed work days and disrupted child care plans have another worry, too: The high cost of power outages, flood damage, and homeowners insurance coverage gaps can leave people with hundreds of dollars or more in unexpected costs.

[Read: 10 Costs Homeowners Insurance Doesn't Always Cover]

Those in Sandy’s path were first hit with the incidental costs of storm preparation, including purchasing flashlights, batteries, nonperishable food, and other survival items. Many of those who lost power also had to toss hundreds of dollars worth of food. After just four hours, meat, poultry, and dairy starts to go bad, warns the Health and Human Services Department.

But like Sandy’s slow build-up, those expenses pale in comparison to the big wallop of the storm’s damage. Unbeknownst to many people, insurance coverage (both rental and homeowners) doesn’t generally cover flood damage. (Instead, the federal National Flood Insurance Program offers it.)

Insurance also sometimes contains an “anti-concurrent causation” clause, which means that if two events (such as flooding and wind damage) happen at the same time, and one is not covered, then damage from either event might not be covered by the policy. According to a February report from the Consumer Federation of America, consumers are often surprised by the deductibles and coverage gaps in their homeowners policies.

[Read: The High Cost of a Power Outage]

Similarly, a recent MetLife survey found that most homeowners don’t realize that if a home’s sump pump backs up and causes flooding as a result, then insurance policies are not likely to reimburse homeowners for that damage. For coverage, homeowners would have to specifically add a sump-pump failure clause to their policy. The MetLife survey also found that one-third of homeowners didn’t know how much coverage their home had.

While it’s too late to prepare for Sandy’s destruction, getting ready now for the next inevitable weather event can help save hundreds or even thousands of dollars later. Here are four ideas:

1. Get smart about your homeowners or renters insurance policy.

Post-storm clean-up is no time to be surprised by bigger-than-expected deductibles or trying to decipher phrases like “anti-concurrent causation.” If you don’t understand your policy, then ask your agent to go over it with you. (Ideally, this conversation happens before the policy is purchased, so you can compare policies and select the best one for you.) Add any additional clauses that you might need, such as one related to sump pumps. Also, consider whether you need separate flood insurance coverage.

2. Memorize your valuables.

Taking photos (and keeping receipts) of any valuable possessions, from jewelry to televisions, can make it easier to file insurance claims later. (Keeping a paper trail after claims have been submitted is also important; if a claim gets denied, it’s easier to file an appeal and take the issue up the management chain with a written record of what happened.)

[Read: When Homeowners Insurance Won’t Protect You]

3. Know where you can go if your home is no longer an option.

Friends who live on higher ground (or who have a generator), nearby hotels that offer affordable rates, or family members in nearby cities or towns can all serve as back-up housing plans if your own home becomes uninhabitable or is in an evacuation zone. Planning in advance can help, since power and wireless outages make it harder to do so directly after a big weather crisis.

4. Build an emergency supply kit now.

There’s no need to wait until the next time forecasters warn that a big storm is coming. By that time, stores often experience runs on key supplies, including batteries, flashlights, and water. Instead of joining that rush, keep a stash of supplies on hand at all times. The kit should include cash, essential documents (including passports, insurance information, and birth certificates), non-perishable food items, clean clothes for every family member, water, flashlights, and a first-aid kit. The added benefit of having this kit prepared in advance is that it can come in handy during unexpected disasters, too, from earthquakes to terrorism attacks.

What are you doing to get ready for the next hurricane?