Flooding common exception in insurance policies

Sometimes it takes a strong storm, like Monday's torrential downpour across the Phoenix metro area, to get people interested enough to pull out their insurance policies. But the aftermath of a storm often is a bit late to find out what types of coverage you do or don't have.

Water damage can be especially tricky. Sometimes it's covered by standard homeowners, auto and renters policies, but often it isn't.

"A lot depends on the situation," said Chelci Vaughan, a spokeswoman for Allstate in Tempe. "Every loss is investigated on an individual basis. Where did the water come from? How did it happen?"

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One key distinction is between damage caused by flooding — water flowing along the ground — and other moisture incursions, especially roof leaks.

Standard homeowners insurance don't cover flood damage. For that, homeowners would need a separate policy backed by the federal government and sold through various insurance companies.

"There's a huge knowledge gap among the public regarding flood insurance," Vaughan said.

Flood damage to cars and trucks typically is covered under the comprehensive portion of auto policies. Even when motorists do stupid things, including driving onto a low-lying road marked by flood-risk signs, they often can receive compensation for insured losses, said Kelly Campbell, vice president of state government relations for the Property Casualty Insurers Association of America.

But the estimated 11 percent of Arizona motorists without auto insurance, or those lacking comprehensive coverage, would be out of luck.

Property insurance companies generally are reporting more claims but not many hard numbers from Monday's downpour.

"We are currently responding to our customers' needs, and it is still too early to know the number of claims that we have received due to the storm," said Victor Hugo Rodriguez, a spokesman for State Farm in Tempe. "Obviously, we have seen an increase in claims activity."

Vaughan at Allstate also didn't have any numbers to report.

Farmers Insurance initially reported just over 300 claims in the Phoenix area. Most are on homeowner policies, with a handful of commercial claims, said Trent Frager, a spokesman for Farmers in Los Angeles.

A standard homeowners policy might cover losses from a leaking roof, especially if the roof was in good shape before a storm. Heavy wind can be enough to push moisture under shingles and into the interior. "Sometimes it just rains so hard (to cause leaks)," Campbell said.

Rain also could get inside if a roof was damaged or windows broken by tree branches.

But a homeowner might have a tougher time receiving approval on a claim if the roof was in poor condition before the storm hit.

When trees fall from a storm and damage a home or block a driveway, the costs to remove the debris often are covered, fully or in part, by standard policies, according to State Farm.

Belongings such as laptops or televisions damaged by a storm might be covered, for people with either homeowners or renters policies. Vaughan said that generally, belongings would be protected if the dwelling were damaged first. For example, insurance wouldn't pay for a laptop ruined because it was left outside in a rainstorm, but a computer damaged after rain dripped in from a damaged roof might be covered, she said.

Even when a policy pays for storm-damage claims, the amount is important. If a loss is below the deductible, which might be $500 or $1,000 or so, homeowners would need to absorb the cost themselves, although it's also worth noting that unreimbursed losses might be deductible, in part, on income-tax returns.

People who make lots of small claims might see their premiums rise as a result, or they could have trouble getting their policies renewed.

"If you think a loss might not rise to the level of your deductible, you might want to opt out of filing a claim," the Arizona Department of Insurance said in a news release Monday. "Your insurance history is evaluated periodically by your insurer to determine premiums and whether or not to continue your coverage, so filing a claim for minor damage may not be in your best interest."

The state agency also suggested documenting the damage and costs for repairs and cleanup by taking photos and keeping receipts.

Monday's storm isn't likely to push up premiums by much, if anything, for Arizonans. Homeowners insurance is a relative bargain here, with people around the state paying about 30 percent less for coverage than Americans generally. The typical premium here is $674 a year, compared with $968 nationally, according to 2011 statistics. Those figures were up from $666 and $909, respectively, in 2010,.

Insurance-pricing concerns become more widespread after storms, wildfires and other natural disasters hit, but companies evaluate the risks over many years when setting prices.

Microbursts and other strong windstorms that occasionally pepper the Phoenix metro area pose a risk, but even these are minor compared with the devastation wrought by earthquakes, tornadoes and, especially, hurricanes — all of which are rare here.

Arizona ranks among the 10 states with lowest homeowner premiums, Campbell said.

"The top 10 states either have dense populations, heavy storms or both," she said.

Flood insurance has a 30-day delay before coverage starts. But there's no waiting period for sewer and drain backup coverage, which can be added as an endorsement to standard policies.

Because public infrastructure such as sewer systems often takes a beating during heavy storms, this can be a wise purchase and typically doesn't cost much.

"It's one of those coverages you don't want to think about until you need to deal with it," Campbell said.

Have further questions on insurance? Post a comment below, or reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.

Flood insurance at a glance

Standard homeowners insurance policies don't cover damage from water flowing across the ground or floor. But the federal National Flood Insurance Program does offer this protection for people willing to purchase coverage.

Homeowners may obtain up to $250,000 in protection for dwellings and up to $100,000 for belongings. The typical premium is about $675 a year, according to the Property Casualty Insurers Association of America.

What's in a policy?

Standard homeowners-insurance policies typically insure your home and adjacent structures, along with personal belongings. They often pay for incidental expenses, such as the cost of lodging for you and pets if you must evacuate or the home is damaged and becomes unlivable. There's also a personal-liability component — largely covering accidents to others at your property. Insurance also makes medical-related payments if someone is hurt on your property, including by pets.

If you install fire alarms, sprinkler systems and other safety features, your insurance company likely will reward you with a discount.

Homeowners should periodically assess their property value and belongings. They should notify their agents about notable changes such as a room addition, swimming pool or even new carpeting. Insurers suggest buying replacement-cost coverage rather than insuring the actual costs of items. Actual costs are reduced by depreciation or wear and tear. Unless you have replacement cost, your policy might not cover a complete rebuilding.