Hurricane Sandy is over; now it's time to deal with your insurer

Flooded street and toppled tree

Now that Hurricane Sandy is over, I suspect many homeowners are going to be in for a nasty surprise from their insurance company.

Those of us who live along the Gulf of Mexico know that most homeowners' policies have a separate, much higher deductible, for hurricanes.

While a traditional deductible may range from $500 to $5,000, your hurricane deductible is based on a percentage of your home's insured value.

It varies a lot, but most will be somewhere between 1% and 5%.

That means a family whose home is valued at $300,000 with a 5% deductible could be on the hook for a whopping $15,000 in damages before it sees a cent from its insurer.

Most states affected by Hurricane Sandy (including New York, New Jersey, Connecticut, Delaware and Washington, D.C.) have hurricane deductibles in play.

Unlike homeowners on the gulf coast who regularly deal with hurricanes, many in the Northeast may not realize that separate deductibles apply.

It's a rude awakening.

In general, the more at risk a home is, the more likely it is to have a higher deductible. So, while a home on the beach might carry a 5% deductible, it might be only 1% for a home 40 miles inland.

You'll have to check the declarations page of your policy to find out exactly what you're facing.

It states not only the percentage but the "triggers" your insurance company uses to determine when your hurricane deductible kicks in. This varies by insurance company and could range from set wind levels to hurricane categories.

When you call your insurance company, it will send out an adjuster to survey your damage. Response time depends on the company but could be anywhere from a few days to a couple of weeks.

Generally, the sooner you contact them, the sooner they'll get to you.

They use predetermined formulas to estimate repair and replacement costs. Don't expect them to spend much time at your home. They'll take notes, measurements and photos.

If you home is so badly damaged you have to move out, you may be able to add temporary living expenses on your claim. So hang onto all of your hotel, travel and meal receipts.

If you meet the deductible and your claim is accepted, be sure to carefully go over what your insurance company is offering.

You don't have to accept a settlement offer if you feel you're being shortchanged. You can plead your case with the adjuster or appeal your claim to his or her superiors.

If you have a mortgage on your home, any check you receive will likely be made out to you and your mortgage bank.

The mortgage company may release the funds to you or they may release them in installments if the damage is major. Since they have a stake in your home, they ultimately want to ensure you make the repairs.

Trees toppled on a house in Northfield, N.J., during Hurricane Sandy.

If your damage is minor and you already know you won't meet your deductible, you might just handle it yourself.

If you have $3,000 worth of damage and a $15,000 deductible, you have to question whether it's worth it to make a claim. You won't get any money out of it.

Insurance companies are reluctant to give a straight answer when asked if filing a claim puts a "black mark" on your record that could result in higher premiums.

When we had minor damage during Hurricane Isaac in August, I was advised by my independent agent not to make a claim for that reason. We wouldn't have seen a dollar from the insurance company anyway, so it wasn't worth it to even take the risk that it might be held against us later. We ultimately had more to lose than to gain from a claim.

If you don't meet your deductible or don't have the cash to cover it, you might be able to get help from the Federal Emergency Management Agency (FEMA) with an SBA disaster loan.

The interest rates are typically at market rate or below. You can borrow up to $200,000 to repair or replace the residence to its predisaster condition.

The process is fairly quick. You apply online, an inspector will visit your home and you could get a decision in as little as a week.

Another option would be to tap your home equity line of credit. You could also apply for a home equity loan, but that might take longer and cause complications. You'd need an appraisal and would have a fair amount of fees.

In any case, if you're making any repairs and not communicating with your insurance company, document those repairs and keep receipts.

Hurricane deductibles are for a calendar year, meaning if you have another storm next year, you may be able to combine those damages to meet the deductible.

Be aware that homeowners insurance does not cover damages due to flooding, even when that flooding is ultimately caused by wind.

Hopefully you have flood insurance through the National Flood Insurance Program. If you don't, you may also be able to tap an SBA disaster loan to help recover from flood damage.

Even as you recover, a problem is that as insurers tally up their losses, they may try to recoup them through increased premiums in coming years.

It happened in New Orleans after Hurricane Katrina in 2005 and in Florida in 2004 when the state got walloped by three major hurricanes.

Some insurers cut their losses and stopped renewing policies. Others stopped taking on new customers.

Homeowners who managed to hang onto their insurance policies saw dramatic spikes in premiums, many increases of 50% or more. It took years for the insurance market to "loosen" up on some parts of the gulf coast.

It remains to be seen how insurers will react to Sandy. But considering Hurricane Irene (in 2011) and Hurricane Sandy both smacked the Northeast, insurers will likely reevaluate their risk.

So, even if you didn't have any damage from this storm, there's a strong possibility that you could be paying for it for years to come in higher insurance rates.