The Flood of 1993—Is Your Home Covered?

Few homeowners’ insurance policies—with the exception of some mobile home policies—provide coverage for losses or water damage to dwellings and personal property caused by flood, surface water, or overflow of a levy. Your household contents and personal property may be covered, however, if you purchased a separate “all risk” personal property floater. In some cases, other losses related to the flood (such as explosion, fire, theft, looting, etc.) and damage to basements from backed up sewers or drains may be covered. Some mobile homes are covered under automobile insurance policies. On a related note, auto insurance policies with comprehensive coverage often include flood damage to automobiles (contact your insurance agent for instructions on how to file a claim).

If you bought a home in a flood-prone area, however, you may have had to buy flood insurance before getting a mortgage loan. So, it is important that you review your flood, homeowners, and other relevant insurance policies (to see what is covered and what is not; and whether losses are reimbursed at actual cash value—replacement costs minus depreciation—or at full replacement cost) or call your insurance agent.

Tips for Those With Flood Insurance

If you are covered by insurance, here are some tips when dealing with flood damage to your home:

Contact Your Insurance Agent

Call your insurance agent or your insurer immediately. Ask them what steps need to be taken to insure that all of your losses can be property documented and recorded by the adjuster. Your insurance agent may be able to give you advice about where to get help with clean-up and repairs. Take notes about who you talked to, when, and what was said. Leave a telephone number where you can be reached. It is a good idea to follow up on your call with a letter detailing the problem. Keep a copy of the letter.

If you have flood insurance and cannot reach your agent or the insurer, call the National Flood Insurance Program at 1-800-638-6620.

Assess Damages and Begin Clean-up

Record the time and date when flooding began. This is especially important for isolated events.

Make a list of damages to the building and contents. If you already have a household inventory—stored safely away from the home—or can use other records (such as canceled checks, purchase receipts, and other proof of purchase records), listing household contents will be much easier. If you don’t have these records, you will need to provide a description of each item and estimate the approximate value, purchase price, and date of purchase to your insurance adjuster.

It is best to videotape or take photographs of the original damages, as well as subsequent repairs, discarded items, and corrective action taken. An alternative is to have two or three neighbors sign your list of damages as witnesses to its accuracy.

Begin clean-up and salvage as soon as possible after photographing original damages. If flooding is extensive in the area, it may be some time before the adjuster can assess the damage to your home. Don’t wait for the adjuster if immediate action or temporary repairs are needed to prevent further loss. However, don’t begin permanent repairs until after you are authorized to do so by the adjuster.

Be sure to keep receipts for materials, labor (yours, as well as any hired labor), equipment rental or purchase, and other flood-related expenses (including temporary housing, food, and transportation costs). Where possible, keep damaged materials (or samples) for proof of loss. Written estimates of needed permanent repairs are helpful for both you and the insurance adjuster.

Work With Your Insurance Adjuster

The insurance adjuster will assess damages to your home and belongings; estimate the costs for repairs; and submit that estimate to the insurance company. How much of your loss is covered will depend on your insurance policy and whether you maintained coverage for at least 80% or more of the replacement cost of your home.

Provide your list of damages and losses, as well as any written estimates for repairs and other information the adjuster requests, to your insurer in order to have your claim processed. Keep a copy of all information given to the insurance company.

The adjuster will ask you to sign a Proof of Loss form, which you (or the adjuster) then submit to the insurer. Remember, you may not be reimbursed for expenses not authorized by the adjuster. You can ask the adjuster for an advance or partial payment for your losses—especially if you need money to make your home livable. Asking for this advance or partial payment is also a good idea if you disagree with the amount of the loss on the Proof of Loss form. Inform your adjuster that you disagree and ask what steps can be taken to straighten out the problem. A visit with your insurance agent may help to resolve the problem. When the final payment is determined later, the earlier payment is deducted.

Keep Records of Living Expenses

If your home is uninhabitable or you must stay elsewhere while your home is being repaired, save all receipts relating to your temporary lodging and food (transportation, also, if you have to temporarily rent a car). If flood damage is included under your homeowner’s policy, some of these costs generally are covered. Flood insurance generally does not cover them, however, although you may be able to get them reimbursed from other sources.

Determine Structural Damages

You will need to find out whether there is any structural damage to your home, which will probably require getting professional help. An engineer may be your best resource. A local building inspector is another resource. A building permit may be needed to repair structural damage or make major repairs. The local building department can advise you.

Certain safety hazards, such as foundation problems, will need to be repaired before you proceed with other repairs. Some problems may be temporary and disappear as drying occurs. Other problems may not be noticeable until at a later date and should be carefully documented.

Select Contractors Carefully

Be cautious when contracting for repair and rebuilding work, especially companies that are not local, established companies or those with whom you have not had previous dealings. Select contractors who have expertise in the type of repair work needed. Since price, quality, service, or completion dates may vary, it’s a good idea to contact more than one person or company. Don’t be rushed. Hastily made decisions may cost you much more in the long run.

Deal only with reputable companies. First, contact the Better Business Bureau closest to the company’s permanent address. You may also want to contact the Consumer Protection Division of the Attorney General’s Office, the local Chamber of Commerce, your local sheriff or police department, your insurance company, or neighbors. Next, request a list of 10-12 past customers (preferably local) from the company. Contact several of these people and ask about the company’s performance. Find out if the company is bonded or insured.

Get everything in writing, including estimates and contracts. The contract should spell out in detail what work is to be done. Make sure any oral promises are written down and signed by the contractor, including changes as repair work proceeds. And BEFORE you sign anything, be sure to read it carefully. If you don’t understand something, ask questions. You may want to get your attorney or someone else you trust (who is knowledgeable about contracts) to help you.

Insurance policies will normally only pay for replacement of the original structure. If repairs will change the original structure (for example, result in a larger deck), the replacement value of the original structure should be documented for the insurance adjuster.

Get copies of bills and receipts. And never pay the bill in full until the work is completed. If possible, don’t pay for any repairs up front. If the contractor wants you to pay part of the cost of supplies in advance, suggest making the payment directly to the suppliers.

Contact Your Lender

Contact your mortgage holder. You may need their approval to cash your insurance claim check. Before you decide on making permanent repairs, make sure your loan will not be affected. Your mortgage holder may also be able to provide financial help, such as deferring interest payments for a month or two.

Check Settlement Procedures

Review the settlement steps outlined in your policy. If you’re dissatisfied with the proposed settlement offer, explain your position. If there’s a significant difference between what the insurance company offers and what you believe you’re entitled to, you may wish to submit the dispute to arbitration.

Tips for Those Without Flood Insurance

If you are not covered by insurance—or if you have some losses that are not covered by your insurance—you need to keep complete records of losses and flood-related expenses to apply for disaster assistance. Local television, radio, and newspapers may provide information about disaster assistance available in your area. Or you can check with local, state, and federal organizations and agencies to find out what is provided.

In addition, you may be able to claim some losses not covered by insurance or reimbursed from other sources as casualty losses on your income taxes. Casualty losses are determined by the decrease in fair market value of property as a result of the casualty (but not more than your adjusted basis in the property before the casualty) minus insurance or other reimbursement. Only that amount of the casualty loss (reduced by a $100 deductible per casualty) that exceeds 10% of your adjusted gross income is deductible. If you have a casualty loss and your community (or city/town) has been declared a federal disaster area, you have the option to deduct the loss on an amended 1992 tax return (and hopefully receive a tax refund) or deduct it on your 1993 tax return. You may want to contact your tax adviser or consult Internal Revenue Service publications for additional information about casualty losses. Again, you will need detailed records to determine and document this loss.

References

“After a Storm...Filing Insurance Claims,” Cooperative Extension Service, South Dakota State University, ExEx14020, June 1992.

“Attorney General Advises Flood Victims to be Cautious in Contracting,” Consumer Protection Division, Attorney General’s Office, July 29, 1993.

Kansas Flood Insurance Facts to Help You,

Kansas Insurance Department, July 1993.

Kansas Storm Season—What To Do Before, During and After, Kansas Insurance Department, 1993.

Repairing Your Flooded Home, American Red Cross/Federal Emergency Management Agency, ARC 4477/FEMA 234, August 1992.

“Todd Warns Flood Victims About Repair Firms,” Kansas Insurance Department, July 30, 1993.

Joyce E. Jones, Extension Specialist, 

Family Financial Management

             August 1993