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By Ann Klefstad
The rain kept falling that day in June 2008. In Kaministiquia, a community near Thunder Bay, staff from Ontario Power Generation monitored the Dog Lake Dam. Anxiety rose with the waters.
The forecast was full of nothing but rain. To avoid what staff believed might become a bursting dam, OPG opened the spillways for a controlled release of water.
Roads were washed out, yards submerged, basements filled and dozens of residents evacuated. The flood crested at more than 2 feet above normal levels.
As waters receded, Thunder Bay District Health Unit tested source waters, and municipal agencies marshaled disaster relief. Roads and homes needed repair and wells had to be decontaminated.
“Hopefully, as water levels drop and the damage is assessed,” Thunder Bay Chronicle Journal noted in an editorial, “the residents’ insurers won’t leave them high and dry.”
But most residents had no relevant insurance: In Ontario, insurance for overland flooding is not sold for residential property, leaving many homeowners in the Kam area without insurance coverage.
As the Lake Superior region enters winter, now is a great time to review what coverage you have on your home before it – and you – become victims of any ice storms, heavy snow damage or spring flooding that may arrive.
For example, what constitutes “external flooding”(like spring runoff into the basement) or “internal flooding” (like frozen pipes bursting) makes a huge difference on what your insurance will or will not cover.
The worst mistakes homeowners make in choosing and upgrading insurance, say regional agents, are to assume what is covered without asking or not to know about some low-cost additions that might recover major expenses when problems arise.
Unfortunately in the case of the Kaministiquia flooding, says Greg Jarvis of Smith & Associates Insurance of Thunder Bay, a number of residents didn’t have insurance to cover the damages.
That coverage is available to most homeowners, Greg says, and such endorsements typically are not expensive, just $25 to $40. Sometimes, depending on the circumstances, a case can be made that the water entered a home through sewer lines, even in cases of overland flooding. Then such an endorsement helps cover any damage.
Smith & Associates did have policyholders whose Dog Lake Dam flood damages were not covered. Some, says Greg, sought recourse from the township or from OPG.
They are not alone: 32 percent of all claims filed in Ontario this year were for water damage – the first time ever that water did more damage than fire (fire caused about 29 percent of claims).
Why? Greg surmises that the turbulent weather is one cause, and the increased cost of cleanup after water, with new protocols to contain mold and mildew, is another. “What had been $5,000 worth of damage, with the new protocols could be three times that,” he says, adding that it’s important to consult your broker to determine the scope of your coverage and the limitations or conditions for any water-related losses.
A Climate of Risk
Gleaning regional newspapers for the last few years shows a sample of what our wild northern climate can do:
• April 2001 – heavy rains near Solon Springs, Wisconsin, washed out the banks of Lake Nebagamon and Upper St Croix Lake, washing away cabins and roads.
• May 2003 – a dam on Silver Lake Basin near Marquette failed due to torrential rains, releasing 8 billion gallons of water into the Dead River. As the water gushed toward Lake Superior, it tore up roads and caused about $100 million in damage.
• October 2005 – a deluge flooded basements and tore up roads in Duluth and Bayfield, Wisconsin. Gale-force winds (up to 45 mph) sent trees crashing down on houses.
• June 2008 – storms brought flooding to Minnesota’s North Shore. Raging waters coursed down the hills above Grand Marais, flooding homes and businesses. These same storms affected the dam at Kaministiquia in Ontario.
• March 2009 – along the length of Minnesota’s North Shore and into Ontario, a heavy ice storm closed roads and downed power lines. Water damage came from power outages as sump pumps failed and basements flooded.
Obviously, area homeowners need to prepare and insure against weather-related problems.
Fending Off Disaster
On the U.S. side of the lake, residential and commercial subsidized flood insurance is offered to anyone – owner or renter – who lives in a community that participates in the Federal Emergency Management Agency’s National Flood Insurance Program.
By participating, the community agrees to manage development in flood-prone areas, called Special Flood Hazard Areas. But even people outside these areas, at moderate to low risk of flood damage, can buy the insurance. For some it’s as low as $200 a year. The only thing necessary is that they live in communities that participate.
What do you do when you discover your community opted out of participation in the National Flood Insurance Program (NFIP)?
This happened to residents of Osceola Township in Michigan’s Upper Peninsula, who discovered in 2007 that their township, part of which is in a flood plain, opted out of coverage in 1974. The township petitioned to be included and now residents can purchase flood insurance. The tradeoff is that they now will be required to buy NFIP insurance to get a mortgage loan if their property is in the flood zone.
Laurie Smith-Kuypers, FEMA spokesperson for the Lake Superior region, notes that “more than a quarter of flood insurance claims filed are not in high-risk areas. It can flood anywhere.”
Even in the largely low-risk Lake Superior watershed, widespread flooding after storms in June 2008 affected many counties, some so severely that they were designated federal disaster areas. And smaller incidents happen around the lake every year.
Congress started the National Flood Insurance Program in 1968 to avoid high levels of disaster assistance by using the insurance to spread the cost of relief, Laurie says. “We try to help people understand their risk. (Federal lending regulations) require people to buy flood insurance in flood-prone areas.” The program helps mitigate possible flood damage by encouraging sound flood-plain management, elevating buildings and raising furnaces and electrical service, to reduce the damage caused by floods, she adds.
Agent Dave Martinsen of Great Lakes Insurance in Ashland, Wisconsin, says that FEMA flood insurance is handled by private insurance agents, but that there’s not much call for it in his neck of our woods. “Some carriers offer it, some don’t. Rates are all pretty much the same, and there are limits – $250,000 for structures, $100,000 for contents. If the property is in a flood zone, it can get complicated.”
The main reason people get it, he says, is to comply with federally backed loan standards. “As bank loans are more closely regulated there’s likely to be more of it.
“Some of the flood zones seem pretty laughable, but if it’s on the FEMA map …. (you must get it for certain loans).”
What Do You Really Need?
Michael Lahti, State Farm Insurance agent for Houghton
and Hancock, Michigan, addressed what coverage is typically needed in his region.
“Wind, fire, hail, that sort of thing is generally covered by your homeowner’s insurance. Only flood really isn’t covered. So if you’re in a flood plain, that government insurance through FEMA is something you should get. Also, in certain areas where there’s a high water table, it’s important to buy extra coverage to cover the disabled sump pump – it’s $75 or so.”
Dave Martinsen in Ashland sees a similar situation in his region. “Water and sewer backup is important, and it’s likely not covered by your regular policy. You get it on an endorsement basis, and it doesn’t cost much: $35 to $45. The limits on coverage can vary from carrier to carrier.”
Larry Sumbs, an agent with Liscomb-Hood-Mason Insurance in Duluth, seconds the water-damage advice. “We have a lot of issues with backup of sewer in the area. Most homeowners’ policies will offer a minimum of $5,000 for this if you add the endorsement. But it’s important for people who have finished basements to evaluate what it would really cost to redo it.”
Larry says that many people find they’re grossly underinsured for this problem.
In Duluth especially, where new regulations require sump pumps to help city water runoff problems, many homeowners do not realize that they now should get that additional sump-pump/sewer backup endorsement, says Rolf Flaig, a State Farm Insurance agent in Duluth. He points to the Lakeside area of the city, where many older homes have sump pumps for the first time.
Agents around the lake pointed out that additional structures, like garages, are often underinsured.
Larry Sumbs notes that a policy typically will pay 10 percent of the value of your homeowner’s policy for garage or other building coverage, which may be enough. But you should upgrade this amount if you’ve added, say, a pole barn for your “toys” or a second bedroom or apartment over your garage.
“I think there’s a common thought process that when you secure insurance that everything is taken care of,” Larry says. “People don’t think about the fact that every policy has exclusions. Claims like water backup, mold, freezing.”
He gives an example: “Maybe a dozen years ago in the old Hotel Duluth, Greysolon Plaza now, a pipe froze on the third floor.”
Its ornate plaster and gilded ceiling incurred about $600,000 worth of damage, he recalls. “There was water out the door in a frozen stream to Superior Street. But they were covered.
“It’s important to have an insurance agent that will be your advocate with the insurer,” Larry adds. It’s a bit like hiring a lawyer to navigate the legal system. Larry emphasizes the value of a service-oriented agent to navigate the complex system of insurance obligations, customs and rules.
Larry sells very little FEMA flood insurance. “On this, most insurers track along with what lenders require. What we have here usually is runoff scenarios, not usually overland flood situations.”
From the Trenches
When a disaster does occur, there are professionals who can help clean up the mess. Jim Hebb of ServiceMaster of Duluth-Superior is one of the guys who people call when things go seriously south with their houses.
What are the kinds of things he and his crews clean up against which people should insure?
“The one thing I see that people are not insured for, are what is classified as floods. People think that we don’t have floods, unless they live in a, quote-unquote, flood plain. But there are a lot of people who, if they had flood insurance, would have a covered loss instead of an uncovered loss. I’ve seen this over 20 years so many times. We have a storm, a quick thaw or some rain, water comes up through the foundation, under a doorway, along the slab, and the normal insurance policy doesn’t cover this kind of flood.”
People really need to sit down with their agents and find out what is not covered, says Jim. Then find out how to get that coverage.
Jim also notes that some insurance companies will discount your home insurance premiums if you have electrical backup for the sump pump. That’s a good idea for this area, he advises. “There are times we have over a hundred calls in a week during a big ice storm. We call in other Service-Master crews then, but it can take days.”
What does it cost to clean up after a flood, an electrical outage caused by an ice storm, a windstorm with downed trees?
“Well, that depends (on) when you go in and scope of the damage. Do they have silt in there? Sewage? Do they have a lot of contents? The cost varies widely. It’s like saying, ‘I hit a deer; what will that cost?’ How much did your car cost? How fast were you going? How big was the deer?”
Right insurance, right amount
People want to insure against the most likely risks, which can be expensive by itself. So they often don’t opt for additional coverage for what seems highly unlikely to occur.
The agents concur that insurance for true replacement value of your home should be your first priority.
Next, think of coverage and adequate sublimits for things like water in the basement, sewer backup and sump-pump failures.
Then, review coverage of your home’s contents, those treasured possessions.
Finally, think about off-site or detached outbuildings – you can increase this fairly cheaply, for about $3 per $1,000 of coverage.
As these agents say: Any number of things can go wrong when nature and your house disagree.
Good to Know
Here are a couple of useful websites to find information relating home insurance needs:
www.floodsmart.gov - the National Flood Insurance Program site to find out about buying that federal coverage.
www.fema.gov – the Federal Emergency Management Agency site has information about buying flood insurance and other ways to plan ahead of disasters.
www.iii.org – the Insurance Information Institute site has information about all types of insurances, a glossary, pamphlets to purchase, statistical data and an “ask an expert section.” It is a member-based organization out of New York.
www.ibc.ca – the Insurance Bureau of Canada provides details on a variety of insurances, including home coverage.
Covered … or Not?
Here are a few disasters that may befall a home. Rolf Flaig, a State Farm Insurance agent in Duluth, gives us the “aye” or “nay” on whether standard home policies should cover these. Be sure to ask your own agent about your policy.
• Hail – covered.
• Fire – covered, except for intentional arson done by or with consent of the owner.
• Pipes bursting – generally covered, but check to see, especially if your policy has been in place a long time.
• Spring floods - not covered. Even with FEMA insurance, if you can get it, the agency must declare a flood, so spring runoffs alone – with or without damage – may not trigger the insurance.
• Sump-pump failure or sewer system overflow - generally can be covered by a “sewer-and-drain” rider or endorsement. Check your policy; the addition can cost as little as $25 a year.
• Ice storm damage – It depends. A collapsing roof from the weight of ice or snow is covered. Damage from ice-laden trees hitting roof, car, etc. generally is covered. Removal of trees may have limited coverage. Replacement of trees is not covered, though landscaping (retaining walls, etc.) may be covered.
• Tornado - covered.