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Walls and ceiling of house blown away, exposing living room, aftermath of Hurricane Katrina, Sulphur
Walls and ceiling of house blown away, exposing living room, aftermath of Hurricane Katrina, Port Sulphur, Louisiana
Sian Kennedy—Getty Images

Ten years ago this week, a storm gathered spin over the Gulf of Mexico and then let loose onto a city nicknamed the “Big Easy.” Hurricane Katrina was by far the most expensive storm in U.S. history: more than $150 billion in damages; hundreds of thousands of Gulf Coast residents displaced; the city of New Orleans broken down in floodwater and churned like bile. Levees that shouldn’t have broken did. Fences floated away. Living room walls took on water to the ceiling—if they remained standing at all.

Institutional structures proved similarly weak against the strength of the storm, most notably the insurance that was supposed to protect homeowners. Private insurance companies balked on payments: Two years after the storm, the New York Times reported that insurers had paid out an estimated $900 million less in coverage to the approximately 160,000 families who lost their homes in Katrina than the state of Louisiana believed those families were owed.

Anticipating that Katrina would not be the last storm of its kind, insurance companies began to restrict coverage, boost deductibles, refuse policy renewals, and raise premiums. By September 2007, many homeowners along the Gulf Coast and Eastern Seaboard had seen their premiums triple; over the past decade some New Orleans residents have faced fivefold increases. Meanwhile, the National Flood Insurance Program, having taken on the risk that private insurance companies shunned, incurred debts to the tune of $18 billion.

Fast-forward to October 2012. That's when Hurricane Sandy, the largest Atlantic hurricane on record, made landfall in New Jersey. Sandy was about a third as costly as Katrina, but many of the storm's victims fared no better with their insurance companies. In May of this year, evidence that fraudulent damage assessment reports may have been used to lowball insurance payouts prompted FEMA to announce that all of the 140,000 families who filed flood insurance claims in the aftermath of Sandy would be given the opportunity to have their files reviewed. The announcement comes after a three-year period in which, even with the passing of the Flood Insurance Affordability Act in 2014, homeowners have seen flood insurance premiums soar. And increases are only going to keep coming: as of April 2015, premiums may rise as much as 25% per year for those in the riskiest flood zones, thanks to a congressional act aimed at alleviating NFIP’s now $24 billion debt.

The bottom line: For homeowners, navigating the insurance market is ever more challenging—and expensive. Between 2003 and 2013, the average premium climbed 69%, to more than $1,000 a year. But with the increasingly unpredictable weather that comes with climate change, and the number of catastrophic storms on the rise, such protection is also more necessary than ever. Here's what you need to do.

Don't skimp on flood insurance. If you own a home in a high-risk zone, Congress has mandated that you must have flood insurance to obtain an insured or federally backed mortgage. If it's not required, you may be tempted to skip it. That's a bad idea; homeowners who live near water should have both building property and personal property flood insurance, recommends the Insurance Information Institute.

If you do live in a high-risk zone, you may actually want to opt for excess flood insurance. Coverage by the NFIP maxes out at $250,000 for your home and $100,000 for your personal property. Excess insurance can boost that up another $500,000—coverage you will need if it would cost you more than $250,000 to replace your home.

Read the fine print. It's always been crucial to know the details of your policy, but insurers' narrowing of coverage in recent years has only made it more so. For example, does your policy cover "actual cash value coverage" or "replacement cost coverage"? Actual cash value takes into account depreciation when reimbursing you for losses; replacement coverage, though it costs about 10% more on average, goes all the way.

What are the caps and limitations on your coverage? The age of your roof may affect how much you'll get toward replacing it, or your screened-in patio may not be covered.

Are there filing rules that you need to follow to get your insurance checks? Your policy may require that you notify your insurer of your intent to replace within six months—or, stricter yet, complete the work within six months, which may be a struggle following a major disaster. You can ask for an extension, and if denied, file a complaint with your state insurance department, but if both fail you could be out thousands of dollars.

And finally, in the event of disaster, will your coverage pay for a replacement house that meets modern building codes? If your home is more than 10 years old, you'll need to allot as much as 20% of your dwelling coverage toward expenses associated with keeping up to code.

Pay attention to deductibles. Most homeowners' policy deductibles are flat-rate deductibles, usually ranging from $500 to $2,500 (some advocate for much higher). There are exceptions though. Hurricane deductibles—which became more common after Katrina and are now available in 19 states and D.C.—are calculated as a percentage of the home's value, usually from 1% to 5%.

On a $300,000 home, a 5% deductible means you'd be responsible for $15,000 out of pocket. That's a lot more cash than the average policy deductible requires you to have on hand, so it's important to have a plan for where that will deductible will come from if you end up needing it.

Document, document, document! The best way to make sure you get the coverage you've paid for in the event of a weather disaster is to obsessively document.

First and foremost, you'll need a full inventory of the contents of your home, including anything and everything of value. A written list is helpful (for major items, include receipts and serial numbers, if you can), but a list with pictures or video footage is even better. You can even download a free app like KnowYourStuff to help you organize and store the list.

And if you find yourself having to make an insurance claim, keep meticulous records of each step of the process. You may need to provide a rebuilding timeline to your insurer, for example, in which case you'll need to keep track of meetings with contractors and when you apply for permits. The fraudulent engineering reports that seem to have been used to undercompensate Sandy victims would never have been discovered had homeowners not taken the initiative to keep original reports and follow up when their payments looked insufficient.

Be realistic about where you’re buying. As frustrating as the spike in insurance rates—or, in some storm-prone areas, insurers' refusals to write sufficient policies altogether—may be, it also sends a message. High premiums signal that an area can be a high-risk place to dwell. If you're considering buying property in a coastal zone or a "disaster prone" region, you may want to weigh your safety—and your future finances—against that ocean view.