Current Gulf Coast conditions raise homeowner insurance concerns

In light of current conditions in the Gulf Coast, the question that comes to most Homeowners minds is, "Do I have appropriate insurance coverage if a natural disaster were to strike?"

Keep in mind that one Risk Management Group recently assessed that losses caused by Katrina will exceed $100 billion, of which only $25 billion will be covered by insurance. Some estimates now exceed $200 billion.

Most property damage will be found to be uninsured if not under-insured.

A couple of things to consider when reviewing your own policy are Replacement Coverage and Flood Coverage. The cost to replace your home is always dictated by current conditions and supply and demand. The supply and demand is not only building material and supplies but also for the cost of labor to rebuild the home.

Consider this, if a natural disaster were to hit western Massachusetts and only one percent of the homes were destroyed and you do not have the appropriate "replacement coverage" and adequate coverage limits you may be underinsured. Home replacement costs are based on current market conditions. In the example above the cost to replace your home could double based on supply and demand. Many insurance policies have terms and conditions that limit the time frame, normally 6 (six) months from the date of the loss to rebuild and the totals paid under "replacement cost" (usually 125 percent of your limit).

If that same one percent of Western Massachusetts homes are all trying to rebuild you may find yourself outside of the conditions in your policy. If that happens you may receive a depreciated amount from your actual replacement cost.

And what about that great mortgage rate you had? The bank most likely will make you pay off the loan and refinance. Where does this financial loss get covered? (It may be an option on your homeowner's policy).

One of the homeowners exclusions is water damage to your home that is caused by surface water or water below the surface. If you do not have Flood Insurance and there is damage by rain run off your policy most likely will not pay for the damages.

Can it happen to you? In New England from1938 there have been five notable hurricanes to hit. The number of documented tornadoes to hit Massachusetts is 2.9 per year.

The largest single day precipitation event recorded in New England was 18.1 inches in Westfield. This caused major flooding in areas that are not considered in a flood zone. Would your policy respond?

Please take the time to review all your coverage with your insurance representative. Ask about the additional coverage's that are available.

Look at different insurance companies if needed because all polices are not the same.

AXiA Insurance Services of Springfield, MA supplied this article. For more information you can contact a representative at 413-205-2942 or you can email them at