Sandy's Uninsured Cost: Up to $15 BILLION Out-of-Pocket

As the Northeastern U.S. cleans up the aftermath of Hurricane Sandy and dusts off their insurance policies, they're in for a shock if they read the fine print.

Many policies will not full cover losses, if they cover anything at all. Rising water and flooded buildings from the 5 to 10 inches of rain will not be covered unless separate flood insurance was purchased.

About 20% of the United States’ population lived in the areas exposed to Hurricane Sandy’s impact and only 14% of homeowners in the Northeast have flood insurance.

Catastrophe risk modeling firm Eqecat estimates that Sandy will do $10 billion to $20 billion in total economic damages and $5 billion to $10 billion in insured losses.

That leaves up to $15 billion in damages that will have to be covered by property owners.

Insurance companies will have no problem handling their portion of the damages. Robert Hunter, director of Insurance for the Consumer Federation of America knows why: They have "mastered the hurricane risk by shifting it to the [homeowners] and to the government."

Even if damages were directly caused by the wind from the storm, the burden of proof falls on the property owner. If wind damage allowed water to enter the home, owners will have to prepare to fight for their claim.

Insurers may sometimes argue that damage occurred because of wear and tear. If winds tore off your roof, they could claim the problem was that the roof was decades old and the hurricane just exposed a lack of proper maintenance.

The few homeowners who have flood insurance may not even be fully covered. Flood insurance is provided through the Federal government. Coverage is provided for up to $250,000 for the home itself and $100,000 for possessions.

Further restrictions exist as well. In below-ground basements, which are quite common in the Northeast, policies typically cover only boilers and other equipment that serve the living area. Everything else is not covered.

Hurricane damage has a higher deductible than ordinary wind damage, if a homeowner policy will cover damages. For hurricanes, deductibles run about 5% of the insured value of a home in coastal areas and around 2% further inland. For example, if the insured value of your house is $250,000, your deductible could be as high as $12,500.

With high coastal property values in the Northeast, especially along the coast, many homeowners will pay several times more before an insurance company will pay their portion of the remaining balance.

With or without insurance, the out-of-pocket costs will be crippling for millions of people right before the cold New England winter months.

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