By David Colmans
The intense battering of the Midwest and the South by the most violent tornadoes in many years has compelled those directly affected to look at how insurance plays an important part in the recovery process.
Immediately after a disaster there is chaos and confusion and the need for search and rescue. It is only after the last victim has been saved, the fires doused, the debris sifted, that town officials, the media and the community turn to the rebuilding phase.
What can one expect from his or her insurer in the short term and over a longer period of time? Let's focus on home insurance because it is so essential to the rebuilding of communities like Tuscaloosa, Ala., or Ringgold, Ga. Just how essential is insurance?
Well, without it, the communities across "Tornado Alley" and now "Dixie Alley" would not have recovered. Today, communities in Mississippi, Alabama, Georgia and several other states are in the rebuilding process, Most of that rebuilding could not be accomplished without insurance dollars.
Property and casualty insurance is the primary mechanism for assisting the majority of these individuals and families who have lost some or all of their housing, personal belongings and vehicles.
Insurers have responded rapidly and in large numbers to these disaster scenes with mobile claims units, regional disaster centers and teams of adjusters who have been making their way through the damaged areas working to help those whose homes or businesses were either totally devastated or damaged. Generally, the company efforts are focused to reach everyone as soon as possible for an initial assessment, but to work with the worst cases first.
What is significant now is that those affected by these incredible storms know what they can expect, what they should do and when.
Those with significant losses should make every effort to work with their insurers, but at the same time find out what other financial resources may be available for state and federal emergency management agencies.
The role of the insurer through the homeowner's insurance policy is very important. The agreement between the company and the insured provides that the homeowner is to be repaired to the pre-disaster condition. Homeowners and their insurer's adjusters work together to restore families and make their property whole again.
Adjusters, structural engineers and other construction professionals are well trained in how repairs should occur. Damage to a property may be so severe that it must be demolished and rebuilt while many others are damaged but are structurally sound and are repairable to pre-disaster condition.
There are important coverages that homeowners should be aware of that can help them during this difficult time. For example, policyholders who have additional living expenses (ALE) as part of their homeowners or renters insurance policy will be reimbursed by their insurer for the cost of staying at a hotel, having to eat out at restaurants, etc. It is important to note that ALE coverage is available only when the insured property is uninhabitable because of a loss covered under the homeowners' policy. Federal flood insurance policies do not include ALE coverage, so this assistance will not be available when a person cannot live in the home because of flooding or storm surge.
Generally, ALE pays for the difference between pre- and post-loss housing and food costs. As an example, before the loss a homeowner may have had a mortgage payment and utility bills (phone, electricity, etc.), and average monthly costs for groceries could be $500. Post-loss, the homeowner/family is staying in a motel or rents an apartment and eats many meals in restaurants. The insurer will pay for the difference between the cost of all these items pre-loss (minus non-continuing expenses such as utilities) and the cost of these things post-loss.
Also, the temporary accommodations have to be similar to the insured property, e.g., if you lived in a two- bedroom house, the insurer will not pay for the rental of a five bedroom house. Policyholders should keep all receipts for lodging and meals to make the claims process easier. Some insurers will provide ALE funds immediately upon being notified of a loss; others may reimburse policyholders at a later date. It is important for policyholders to contact their insurer or insurance agent for more information about this coverage.
The amount of coverage for ALE differs from insurance company to company and depends on the specific homeowners policy. Many policies provide coverage equal to about 20% of the amount of insurance on the home. For example, if the dwelling coverage is $500,000, ALE coverage would be $100,000. Some policies also have time limits; i.e. once the covered event occurs, the policyholder's ALE coverage will cover expenses for a certain period beyond that date.
ALE coverage provides an important lifeline to policyholders whose lives are devastated by disasters. In many cases ALE coverage can help families leave shelters and move to better housing, providing the opportunity to improve a difficult situation.
With so many vehicles that were damaged or destroyed in these violet storms, there is important information for motorists. If the vehicle's windows are shattered, try to cover the vehicle with a tarp to prevent further damage before it is removed from the scene. If the vehicle has debris on it, often insurers will pay to have the debris removed, so save receipts and take photos if possible for your adjuster. If the vehicle is non-drivable, work with your insurer about its removal to a repair facility or a holding garage. Older model vehicles may need to be moved to a salvage facility. If only minor or moderate damage has ocurred and glass is broken out, have it replaced as soon as possible before it is taken to a repair facility to insure now further interior damage can occur.
With hail losses, work with your carrier on a paintless dent repairs or an authorized repair facility if traditional body repairs must be done.
Communication with your insurance agent or insurance company is crucial at this time because it is often difficult for adjusters to locate the insured and begin or continue the claims adjusting process.
Rebuilding will be completed over time. Homes and businesses will once again thrive. One step at a time should be the expectation. It works best with maintaining contact with your insurer.
David Colmans is the executive director of the Georgia Insurance Information Service. Contact him at (770) 565-3806 or by email at dcolmans@giis.org.