It appears that the victims of Hurricane Sandy have to jump quite a few unexpected hurdles before receiving their flood insurance claims. Even four months after the landfall of Hurricane Sandy, victims are still struggling to receive reimbursement from their flood insurers.
Insurance provisions can be extremely confusing; and policy holders in New Jersey are wondering if this wasn’t a deliberate decision by insurance companies in order to delay payouts. In some cases, according to an article in the Star-Ledger , the payments were delayed for so long that they are no longer sufficient to cover the damage combined with the expenses of temporary living. Many residents have found that the payments that were promised them have been significantly lowered without explanation.
While many policy holders were under the impression that they had purchased full coverage; coverage that would pay for the entire loss of their $200,000 homes along with $60,000 worth of belongings. However, that amount doesn’t take into account the common practice of deducting the amount of property depreciation. So, if the home’s original purchase price $200,000, and the homeowner purchases the maximum amount of flood insurance, the payout isn’t automatically $200,000. Should the claim be approved, the payout will be minus the deductible, as well as minus the property depreciation.
If the payout is given at all. Of the more than 140,000 claims submitted for reimbursement, only 66 percent have been closed; and the fact that the claim has been closed is no guarantee that payment has been issued. Thus far, 5,900 have been closed without having been paid out.
FEMA has reportedly given incentives to the private insurers that handle the flood insurance on FEMA’s behalf; FEMA withholds payments to the insurance companies until the claims are closed out and paid. However, the FEMA auditing process is strict, and if the auditors have determined that overpayments were made, then the money is taken back from the insurer directly.
Recouping flood insurance benefits has turned into a full-time job for many hurricane victims. Policy holders often have to leave several messages for their adjusters before their calls are returned; and not all of them even are.
The promised flood insurance payouts that might have sufficed two months ago are no longer acceptable for many victims that have had to seek shelter in hotels and motels. In order to cover the mounting living expenses, hurricane victims have had to dip into their retirement accounts. There are not only the hotel/motel bills to contend with, there are the expenses of travelling to work or school from sometimes distant locations, as well as the cost of eating out, since most hotel rooms are not equipped with kitchen areas.
When purchasing disaster insurance of any kind, make certain that you go over all of the provisions with your adjuster thoroughly. If you are unsure of the meaning of any part of your policy, ask your adjuster to clarify it for you; if he or she is unable to do so, do not purchase it.
Make a list of all of the valuables in your home, along with the original purchase price, date of purchase and serial numbers. It is a good idea to scan the list, along with all other important documents and either email them to yourself or subscribe to a data recovery service; in the event a disaster that destroys your property and possibly your computer and your files, you will still be able to access your paperwork.
 Beeson, Ed: Hurricane Sandy Flood Insurance Claims: An Exercise in Exasperation, Homeowners Say 2/24/2013 http://www.nj.com/business/index.ssf/2013/02/sandy_insurance_story.html