Your car and basement might not be covered by insurance after a flood. Here's why

The aftermath of summer storms, such as those that hit many neighborhoods and freeways in metro Detroit, often includes many angry consumers who soon discover what their insurance policies do — and don't cover — in these types of emergencies.

Some cars that ended up submerged in water on I-94, for example, might not be covered for those damages by insurance.

J. Robert Hunter, director of insurance for the Consumer Federation of America, said drivers will need to have comprehensive insurance coverage on their auto policy when there is flooding or water damage. You'd pay the deductible out of pocket, based on your policy, but then could possibly see insurance kick in.

"Service varies a lot by insurer," Hunter said. "I would seek total loss if the engine was involved."

Many drivers of older cars, though, may have dropped their comprehensive coverage to save money on their auto insurance. And if they're dealing with flooding, they're really stuck.

"If you want your car to be protected from flood, you do have to have a comprehensive policy," said Scott Holeman, media relations director for the Insurance Information Institute, which represents larger insurers that offer property and casualty insurance for homes and autos.

Holeman noted that his father used to keep an old truck in a very rural area in Kansas where he only had liability insurance on that truck — not comprehensive on it. But that was a vehicle that was only used occasionally and the family wouldn't face a hardship if the truck was damaged beyond repair.

He said people need to carefully evaluate what they can afford to do if a vehicle isn't covered when there's flooding or another issue.

"What would you rather do? Have a whole new car payment?" he said.

Comprehensive coverage would pay for a variety of mishaps, including theft, natural disasters like a tornado, water damage, fire, falling trees and vandalism.

Again, your entire cost of a buying a new car isn't going to be covered.

Allstate notes online: "Comprehensive coverage has a limit, which is the maximum amount your policy will pay for a covered claim. If your vehicle is totaled by water damage, comprehensive coverage helps pay to replace your vehicle, up to its depreciated value (called 'actual cash value')."

More: Detroit water officials say help is available for flood-affected residents

More: My basement flooded, and I didn't know what to do | Opinion

The general theory is drivers can consider eliminating comprehensive coverage if the value of their car is lower than the cost of such coverage. But you're often not able to drop this coverage if you lease the car or the car loan isn't paid off.

Remember, if you lease your car or still have a loan, you almost certainly have comprehensive coverage as it is required by lenders and lessors, said Douglas Heller, the insurance expert at the Consumer Federation of America.

Nationally, about 78% of auto insurance policyholders have comprehensive coverage, according to the 2020 National Association of Insurance Commissioners Auto Insurance Database Report, which uses data from 2017.

In Michigan, almost 86% of policyholders add comprehensive. And most people will need to pay a deductible.

If your car or truck suffered storm damage, Heller said, you want to take extra care because the vehicle could have trouble operating and you might get hurt by broken glass or branches.

Document the damage with photographs or video at a safe distance.

When damage is severe, Heller said, especially if the engine was damaged, you may be likely to have the claim paid as a total loss, which represents the current value of the car less the deductible. If this is the case, the insurer will generally take ownership of your old vehicle.

He also said consumers should make sure the insurer pays for all the various costs associated with buying a new car, including things like tax and fees associated with ownership. You should also get reimbursed pro rata for the annual vehicle license fee (registration fee) you may have paid for the destroyed vehicle.

Respond to the requests your insurer will make for information. But also be very clear about your expectation for being paid the full value of your claim, he said.

Get a second opinion from an auto repair shop that you trust, Heller said, if you're thinking the insurer is low-balling your claim or cutting corners on repairs.

"If the car is a total loss, be prepared to provide evidence supporting your view of the value of the car," he said.

Research the market value for the car you were driving as well as any documentation (photos and service records) of the car before the damage was done.

"If an insurer is being difficult about paying the full value of the claim, you should file a complaint with the Department of Insurance and Financial Services," Heller said.

In some cases, a consumer may have to consider seeking legal representation if the company won't make a fair claim payment.

Many times, people think they're covered for flood damage when they're not. Only when there has been massive water damage do many people get an up-close view of the complexities of coverage.

The first step is to take time to review your insurance policy, if you're able to find it, and talk over what's covered with your agent. It's good to have the policy number and other relevant information on hand.

Experts say it's best to tell your insurance agent if there is water damage to your home or other structure to determine what coverage is available. Don't necessarily assume that the damage was caused by a flood.

"Consumers should not simply state that the damage is due to a flood as there may be additional causes for water damage, such as a sewer backup or failing sump pump, that may be covered under the policy," according to tips from the Michigan Department of Insurance and Financial Services.

The Michigan Department of Insurance and Financial Services will answer questions and assist consumers from 8 a.m. to 5 p.m. weekdays at 877-999-6442. Homeowners and drivers, though, should try to work with their insurers first.

Michigan consumers can file complaints with the state agency at Michigan.gov/DIFScomplaints. "DIFS encourages consumers to first attempt to resolve any claim disputes directly with their insurance company," according to tips from the state. "If a resolution cannot be reached, DIFS will help try to resolve disputes."

The state insurance department has a worksheet online to help track claims and conversations. You want to take notes of who you talked with and when and write down the outcome. See www.michigan.gov/difs.

Do not wait to clean up a basement. You want to try cleaning and protecting your property even before you're able to communicate with an insurer.

Take photos or videos of damaged property but realize that much of your personal property may not be covered. Even so, you want to document the loss. Some experts recommend that you do not want get rid of expensive items until instructed to do so by the insurance company.

In Michigan, the insurer must tell you exactly what information the insurance company needs to handle your claim. The company must tell you this within 30 days after you have let the company know about your loss.

The immediate goal after a disaster is to protect your property and avoid further problems, such as mold build up. Keep paperwork and receipts for any supplies bought to protect the property.

Experts say you want board up or cover a damaged window or roof, for example, or replace a broken lock as soon as possible to minimize future damage.

Another unfortunate reality of any crisis is that rip off artists may try pushing a "good deal" because they happen to be in the neighborhood.

Among other things, the Better Business Bureau warns: "While most contractors abide by the law, be careful allowing someone you do not know to inspect your roof and other areas of your house. An unethical contractor may actually create damage to get work."

And the BBB warns you might think you're dealing with a local business when you're really not.

Sometimes, so-called storm chasers offer to pay local construction companies substantial amounts of money to use the business's established name, reputation and phone.

"They masquerade as a local business, collect the insurance money and then move on, leaving the real business to deal with unsatisfied customers due to bad workmanship, unfinished work, or unfulfilled warranties," the BBB said.

About 27% of homeowners policyholders nationwide said they had flood insurance, a record high, according to a survey conducted in July 2020 for the Insurance Information Institute. That's up from 13% in a survey in 2018.

And 24% of respondents from the Midwest said they had flood insurance.

But that same study notes the latest national figure is higher than estimates by the National Flood Insurance Program, indicating that "homeowners may not fundamentally understand what flood coverage is and how it works."

Here's the deal: Flood damage is not covered by standard homeowners and renters insurance policies.

But there are certain insurance policies, including federal flood insurance, that homeowners may have purchased for coverage for flooding or water and sewer back-ups resulting from storms or other natural disasters.

The National Flood Insurance Program offers two types of flood insurance coverage: Building Property, which would cover your actual home and things like electrical and plumbing, and Personal Property, which helps cover what's inside like furniture and clothing. The NFIP recommends buying both types of coverage.

Coverage through the federal flood insurance program typically takes 30 days to go into effect, according to experts. But there are some exceptions, such as if you purchase flood insurance while making, increasing, extending, or renewing your mortgage loan. Or if you change your flood insurance coverage on your insurance policy renewal bill.

The National Flood Insurance Program notes: "Just 1 inch of water can cause $25,000 of damage to your home."

Granted, the cost can be lower or higher depending on your home.

"People are getting more educated to the fact that even if they're not in a floodplain that there is a flood risk," said Holeman, of the Insurance Information Institute.

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