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Disaster Insurance in New Jersey

Disaster insurance provides coverage for natural disasters in New Jersey. It can also be called hazard or catastrophe insurance. New Jersey is home to several natural disasters like droughts, tornadoes, severe storms, tropical storms, floods, extreme heat, wildfires, and landslides. The state also experiences mild natural disasters like thunderstorms, tsunamis, and earthquakes. Disaster insurance protects commercial and residential property owners from the financial complications caused by disasters. The Department of Banking and Insurance (DOBI) regulates and licenses the major insurance businesses in New Jersey. The DOBI protects and educates consumers while promoting the insurance industry's growth, financial stability, and efficiency. Note that the Federal Emergency Management Agency (FEMA) supervises and administers flood insurance caused by forces outside the insured property. For instance, FEMA will not offer protection in the event of a flood caused by a faulty drainage system.

It is essential to obtain catastrophe insurance policies for the common disasters specific to your locality. New Jersey has specialized hazard insurance policies and these policies cannot be interchanged. For instance, your insurance provider is not responsible for paying any claims if you purchase landslide insurance and suffer tropical storm surge damage.

Some natural catastrophes in New Jersey are covered by typical property insurance policies, while others require separate or stand-alone insurance policies. For instance, landslides, tropical storms, and hurricanes require separate or stand-alone insurance policies, while fire, wind, and hail are often covered by a standard commercial or residential property insurance policy. A typical property insurance coverage will not offer much protection from catastrophic natural disasters. Therefore, it is best to be aware of the exclusions and coverage provided by your insurance policy.

It is critical to comprehend the coverage your insurance policy offers when it comes to protecting your buildings (commercial and residential) from natural catastrophes. Many New Jersey property owners mistakenly believe that flooding caused by a storm surge or other forces outside the insured property is also covered by their residential or commercial property insurance, only to learn that they were not protected after a disaster.

To prevent wrong assumptions about your disaster insurance policy, it is important to speak with a New Jersey-licensed P&C insurance agent to help go over your insurance policy and to get additional disaster insurance in place, if gaps in coverage are identified.

What is Natural Disaster Insurance?

Natural disaster insurance in New Jersey protects businesses and residences against the financial implications of natural disasters. It is imperative for owners and tenants of commercial and residential buildings in disaster-prone areas to purchase natural disaster insurance. This is because the likelihood of weather-related disasters is projected to rise yearly due to climate change. Having disaster insurance becomes necessary because disaster insurance shields property owners from expensive losses.

Do Disasters Need Insurance Coverage?

Yes. The cost of repairing or rebuilding/replacing destroyed buildings and other infrastructure after natural disasters can be covered by disaster insurance. A natural disaster is a devastating experience, and it may take as little as several days to a lifetime to fully recover from its effects. Disaster insurance can reduce out-of-pocket expenses in the event of an occurrence. In 2021, tropical storm Ida tore through New Jersey, causing an estimated $100 million in damages, leaving several dead and countless homeless. To ensure your residential or commercial properties are insured when a disaster strikes, purchase disaster insurance.

FEMA recommends property owners in communities consider mitigating the likelihood of disasters occurring in their areas to lessen the severity of the damages. The National Institute of Building Science (NIBS) estimates that every dollar spent on disaster risk reduction will result in a $6 reduction in overall disaster expenses. It is necessary to have disaster insurance to avoid having to pay for expensive repair costs out of pocket.

Consult with a knowledgeable Property and Casualty New Jersey disaster insurance agent who can evaluate your needs and assist you in choosing the most suitable and affordable natural disaster coverage.

What Types of Natural Disasters are Common in New Jersey?

Common natural disasters in New Jersey include:

  • Landslides: Landslides are caused by disruptions in the normal stability of a slope. In New Jersey, they are caused by heavy rainwater, earthquakes, and human activities. New Jersey has 21 counties, many of which have experienced at least one landslide; over 345 landslides occurred from 1782 through December 2019. Landslides are considered earth movements, just like earthquakes, and your insurance provider will not cover them under your homeowner's or commercial property insurance policy; you will need to buy a separate policy for that

  • Tropical Storms or Hurricanes: Tropical storms are also called hurricanes or tropical cyclones. Tropical storms are horizontal winds that travel at 75 to 200 mph. Hurricanes are commonly accompanied by other natural disasters like storm surges, floods, high winds, and tornadoes. New Jersey’s coast stretches across 1,792 miles, and 17 of the 21 counties in the state touch some parts of these coastlines. These communities along the coast are at risk of increased hurricanes due to the sea-level rise. The coastal communities are home to over 80% of the state’s population, therefore putting at least 9 million people at risk. Tropical systems can form at any time of the year, but the New Jersey hurricane season typically runs between June 1 and November 30. Hurricanes that affected the State of New Jersey in recent history include:

    • Hurricane Ida in 2021, which resulted in an estimate of $10 billion in damages in New Jersey

    • Hurricane Irene in 2011, which resulted in an estimate of $4.3 billion in damages in the United States, including New Jersey

NOTE: Localized tornadoes can also be produced by hurricanes. Despite the fact tornadoes are naturally occurring, wind damage is typically covered by standard property insurance.

  • Flooding: Areal flood is the most common natural disaster, and most flood events in New Jersey are usually caused by heavy rains, hurricanes, or tropical storms. There are 14 coastal states in the United States, and New Jersey is one of them. With New Jersey being a coastal state, its coasts stretch across 1,792 miles, and they are threatened by the rise in sea levels due to climate change. With the rising sea levels, the frequency of minor tidal flooding increases. New Jersey is also home to several rivers, and overflowing rivers are also a major cause of flooding in the state. In 2022, New Jersey’s Blue Acres program (in cooperation with the Federal Emergency Management Agency) has allocated $50 million for mitigating floods and to sponsor the buyout program, where the flood-prone properties are being purchased by the state and converted into open plots of land.

  • Hailstorms: Hailstones are water generated. Despite not being located in the nation's hail alley, New Jersey experiences a sizable amount of hail damage every year. Hailstones are solid precipitation that resembles ice pellets and may feel hard as they fall. They develop when a thunderstorm updraft lifts raindrops or drops of water over the air's freezing point. How long a hailstone is hung above a cloud, catching more water droplets, determines the hail size. Long-suspended water droplets grow into large hailstones, while shorter-suspended droplets grow into smaller hailstones. A hail swath provides evidence of a hailstorm for researchers. A hail swath is a path that hailstones leave behind when they drop

NOTE: Thunderstorms can occasionally cause hail events

  • Wildfires: According to the New Jersey Forest Fire Service, 1,500 wildfires damage or destroy over 7,000 acres of the state’s forests annually. In addition to destroying forests, wildfires pose a growing concern to those who live near forested areas and to those who enjoy the state's outdoors for a variety of recreational activities. Typically, New Jerseyans expect wildfires in the late spring, which occurs in late March or early April annually.

What Types of Disasters are Insurable in New Jersey?

Every natural disaster that occurs in New Jersey can be insured. Listed below are the major insurable disasters in the state:

  • Floods: Due to contaminated precipitation, flooding can result in the damage of crops, the death of livestock, the loss of human life, and the spread of waterborne diseases. All flood-related losses for insured residential and commercial properties are covered by flood insurance in New Jersey. With a few exceptions, New Jersey property insurance (residential and commercial) covers flood events that occur inside the home, while the National Flood Insurance Program (NFIP), which is run by the Federal Emergency Management Agency (FEMA), covers flooding caused by severe weather and from water sources outside homeowners' direct control, like heavy rains.

  • Hurricanes or Tropical Storms: Tropical storms cause massive destruction of animals, plants, infrastructures, and human lives. Storm surges, heavy winds, and flooding frequently accompany hurricane events, and they are not covered by regular property insurance policies.

  • Wildfires: Wildfires can negatively impact communication, transportation, power, gas, soil quality, and water supplies. Additionally, wildfires worsen air quality, obliterate infrastructure, and occasionally claim human lives. Wildfire coverage is included in most homeowner's insurance policies.

  • Tornadoes: A tornado is a wind that rotates erratically and can obliterate anything in its path. Trees can be uprooted, and homes and cars can all be destroyed by tornadoes. Tornado-related damages are typically covered by home insurance policies.

  • Sinkholes: A sinkhole is a deep hole in the ground that develops due to the surface layer collapsing. When it rains, and there is no smooth passage, water runs deep underground and starts to disintegrate the rocks, creating craters and sinkholes. Since the craters develop gradually, there may be no warning until a sinkhole suddenly appears. Sinkholes can cause significant soil damage, as well as the loss of life and property. Standard commercial and household property insurance policies do not cover sinkholes. Sinkhole insurance must be obtained as a stand-alone policy.

  • Hail: The most common catastrophe in New Jersey is hail, which is often covered by standard property insurance with a separate deductible.

What Type of Disasters are Not Insurable in New Jersey?

There are no uninsurable natural disasters in New Jersey. Property insurance covers natural catastrophes like hailstorms, wildfires, winds, thunderstorms, and volcanic eruptions. It is only possible to obtain stand-alone policies for insurance against major natural disasters like earthquakes, floods, and sinkholes, which are excluded from regular property insurance policies.

What are the Types of Disaster Insurance in New Jersey?

Disaster insurance in New Jersey shields locals and businesses from monetary losses caused by natural or man-made disasters. Natural catastrophes are rare occurrences with costly repercussions. Each of the various catastrophe insurance plans available in New Jersey is tailored to a specific event; therefore, they cannot be used interchangeably.

The commonly purchased natural disaster insurance in New Jersey include:

Earthquake Insurance

Earthquakes occur in New Jersey, but not often. When they occur, most are small but can still be strong enough to knock out items off the shelves, crack plastered walls, and crumble chimneys. Even though they rarely happen, earthquakes can seriously damage your home's foundation with a mild movement, costing thousands of dollars in repairs. Coverage for earthquakes does not come with your property insurance policy but earthquake insurance is sold as a stand-alone policy. It is crucial to comprehend this catastrophic exclusion in your policy because earthquakes are not at all covered by property insurance policies, and their effects can be felt for a long time. An earthquake can also be triggered by a thunderstorm.

Earthquake insurance premiums in New Jersey typically range from $500 to $800 annually. The following should be included in a typical earthquake insurance policy:

  • Dwelling Coverage: This aids in repairing or rebuilding a damaged or destroyed home or business property

  • Loss of Use Coverage: If an individual's covered home becomes uninhabitable, this will pay for their interim living costs.

  • Personal property insurance: This coverage assists in the replacement of damaged personal belongings like refrigerators and televisions

You require the services of a certified P&C insurance agent in New Jersey to find out whether your neighborhood is earthquake-prone and what other coverage your disaster insurance policy provides.

Flood Insurance

In New Jersey, floods are often beyond the scope of normal residential and commercial property insurance policies. Flood damage is covered by flood insurance. The National Flood Insurance Program (NFIP) provides flood insurance to businesses, renters, and homeowners. As a property owner in New Jersey, you can only purchase flood insurance from the NFIP through licensed insurers. You can also purchase flood insurance from private flood insurers; they can offer competitive pricing, but they do not report to an overseeing federal agency. The average yearly NFIP flood insurance premium, according to FEMA, is $700, but depending on the coverage amount and risk level, it can cost closer to $1,000 in New Jersey. This is a separate expense, in addition to your usual property insurance.

Before the flood season, which in New Jersey is normally between May and June, it is crucial to buy flood insurance. After purchase, the policy does not go into effect until after 30 days, so make sure to time your purchase wisely. Search for your property address on the FEMA Flood Map Service Center to learn more about flood risk in your locality. If your neighborhood participates in the NFIP, get in touch with a property insurance agent licensed to sell Flood coverage.

About 20% of flood insurance claims, according to FEMA, originate in low-risk locations. As a result, anyone runs the danger of losing everything owing to frequent flooding. The following are covered under flood insurance:

  • Flood damage to the building

  • Electronic devices like air conditioners and plumbing systems

  • Personal belongings like furniture and artworks

  • Detached structures, such as garages

Windstorm Insurance

In New Jersey, windstorm insurance covers losses caused by strong winds, including those from tornadoes, tropical cyclones, hailstorms, and storms. In New Jersey, windstorm damage is covered by regular property insurance, with two distinct windstorm deductibles:

  • Windstorm Deductible: This deductible applies to all types of windstorm claims, including those from tornadoes, hurricanes, and extremely strong winds. It ranges from 1% to 5% of the property's insured value. Lower deductible means more coverage and higher premiums.

  • Tropical Cyclone Deductible: This deductible is applicable when a named storm, such as "hurricane Sandy," causes damage. It ranges from 1% to 5% of the building's coverage amount.

The average cost of windstorm insurance in New Jersey is $900 to $1,300 annually, and it covers the following:

  • Physical damage to property

  • Additional living expenses if your house becomes temporarily uninhabitable

  • Personal belongings inside the property

  • Detached structures like tool sheds, garages, and fences

Sinkhole Insurance

New Jersey sinkhole insurance must be obtained separately; Regular property insurance does not cover them. In New Jersey, the annual premium for sinkhole insurance is typically between $2,000 and $4,000. Sinkhole damage to buildings and personal possessions is covered by sinkhole insurance. The foundation repair and ground stabilization are also covered by this insurance coverage. A sinkhole can occur without notice. To learn more about sinkhole insurance, get in touch with a New Jersey registered disaster insurance agent.

Do you Need Disaster Insurance in New Jersey?

If you reside or operate a business in a county in New Jersey that is vulnerable to natural catastrophes, you need to strongly consider disaster insurance. Purchasing catastrophe insurance based on the common natural disaster in your area is essential because standard property insurance policies do not cover severe natural disasters. If you are unclear about the most common natural disasters in your city or county and how often they occur, you can always contact a knowledgeable New Jersey-licensed P&C insurance agent for details. Damages from natural catastrophes are usually too expensive to be covered by personal funds. According to FEMA, an inch of floodwaters can cause $25,000 in damages. Just imagine the possible damages from copious amounts of water coming into the structure from a natural disaster. You can save a lot of money by getting disaster insurance before a tragedy strikes.

In New Jersey, Hurricane Sandy devastated numerous natural resources, slowed economic activity, and resulted in $19 billion in damages. Thousands of residential units were destroyed, leaving thousands of people unexpectedly homeless. Before a disaster alert or a flash flood warning is issued, it is crucial to buy the necessary disaster insurance. Most disaster insurance providers require the insured to wait 14 to 30 days before the coverage begins - so don’t procrastinate getting your coverage until it’s too late.

Note that your insurance provider normally will not accept a new application, increase your coverage, or accept an existing application after a disaster alert has been issued for a specific area. The National Hurricane Center (NHC) notifies residents in regions that may be impacted by natural catastrophes. Therefore, if you live close to a coastal region, you should periodically check the NHC list for new warnings. In addition to keeping an eye on wind patterns, thunderstorm clouds, and other precipitation types, the National Oceanic and Atmospheric Administration (NOAA) also tracks them. The National Weather Service (NWS) offers weather predictions and notifications. The NOAA can also detect hail, floods, tsunamis, thunderstorms, and strong winds.

What Should I Do after a Natural Disaster in New Jersey?

If you are a natural catastrophe victim in New Jersey and are uninsured, you will most likely pay out of pocket for costly damage repairs. A natural disaster might result in significant financial loss and leave a person in debt. Both the present and the future may be affected. If your financial situation was precarious at the time of the incident, you might find yourself homeless and forced to seek refuge or shelter in facilities run by the government. Therefore, it is essential to have adequate disaster insurance before a calamity strikes. Ask your insurance agent if you have enough coverage for natural disasters under your residential or commercial property insurance, and make sure to have this discussion every year. Property values and dangers fluctuate, and so should your insurance coverage.

Your insurance provider will pay the repair costs up to the limits of your policy if your property is covered by disaster insurance. If you temporarily move because your property is uninhabitable or not fit to run a business, your insurance provider might also pay your additional living expenses and income loss.

These are the measures to take if a natural disaster in New Jersey has damaged your residential or commercial property and affected you:

  • Take pictures and videos of the damaged and unaffected portions of your building

  • Give your insurance company as much information as possible and notify them via a licensed P&C agent

  • After filing a claim, you can anticipate an adjuster to visit your building to confirm your insurance claim and establish a settlement figure

  • Make urgent repairs to fend off future harm

  • Keep all repair receipts for complete reimbursement

  • Keep previous invoices and receipts; they will aid the adjuster in determining the value of your personal belongings

  • Make sure you don't get rid of any damaged items before the adjuster evaluates the damage

  • If the natural disaster was caused by flooding or a hurricane, get in touch with FEMA as they can offer housing aid, low-interest loans, and other resources to help you get through the difficult times

  • If you must temporarily relocate, be cautious to protect all valuables in the building or remove them

  • Make sure you comprehend what is covered by your coverage

  • Hire a qualified contractor to repair your property when your insurer accepts your claim

Discuss your insurance needs with a licensed property insurance agent in New Jersey who can help identify your needs and find you the appropriate disaster insurance policy.