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By Paul Reynolds
October 19, 2021
Collapsed house damaged by earthquake
Shutterstock

Home insurance doesn’t cover damage from all weather catastrophes — at least not quickly. Now Iowa-based startup Recoop is promising to address those shortcomings with all-in-one disaster insurance that promises fast payment.

Recoop’s offering covers property damage from weather that’s officially declared a natural disaster, including for some perils (notably floods and earthquakes) that usually require their own policies. And the company says it will process claims within a day or two, compared with the weeks a regular home insurer can take to pay.

Still, the cost of coverage from Recoop isn’t negligible; depending on the disaster risk where you live, you’ll pay at least $52 a month for $25,000 of coverage — the biggest policy Recoop writes. Also, not all flood types are covered and the policy, like many, comes with some significant caveats and limitations.

Here are the pros and possible cons of Recoop, which is now available in 37 states, with plans to expand eventually to such others as New York, California and Florida.

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The pluses to Recoop’s insurance

Here’s how Recoop stands out in ways that are useful:

Recoop covers perils your home insurance does not. Recoop covers wildfires, tornadoes, gas explosions, dust storms and major winter storms — which are all in scope for regular home insurance. But it adds coverage for two additional key hazards that have traditionally required their own separate policies: earthquakes and floods — albeit only floods from one source, that of coastal storm surges from a hurricane.

Also, settlements for some damage may be bigger than with some home insurance. Because they factor in depreciation, some barebones home insurance policies pay out only part of the cost to replace parts of the home such as the roof. Recoop has no such restriction, according to Alex Sabbag, the company’s chief marketing officer.

Claims payment is fast, the company says. Recoop says it pays claims within 24 to 48 hours. By contrast, it can take as much as 30 days for a traditional home insurer to pay a claim.

No deductibles. Recoop skips the need imposed by homeowners or renters insurance to pony up a certain amount before reimbursement kicks in. With claims for extreme weather — notably, wind damage from tornadoes and hurricanes — regular insurers calculate deductibles as a proportion of the policy’s coverage. A contribution of between 1% and 5% of the home’s insured value is typical. For a new roof, say, that contribution could match or even exceed that of your regular deductible.

Making a claim will not raise your premium. Where the cost of your regular home insurance may rise if you make multiple claims, Recoop says there are no such consequences to filing a claim under their coverage. In fact, Recoop allows you to make two claims within any one year, provided they are for separate disasters.

The drawbacks of Recoop's coverage

Here are some limitations to Recoop’s policies:

Only declared disasters are covered. Recoop’s coverage kicks in only for events that are officially deemed natural disasters by state or federal authorities. So you’re out of luck if your property is damaged by bad, but not catastrophic, weather.

Maximum coverage is relatively low — and there’s a minimum claim. Coverage amounts start at $5,000 and escalate in increments of the same amount to a maximum of $25,000. Those figures fall far short of the financial damage you’d suffer from the loss of your home — or even serious damage to it — in a flood or earthquake.

In addition, there’s no reimbursement for minor damage. The minimum allowable claim is $1,000.

You must carry regular home insurance. You can’t make Recoop your only home insurance; you must have a regular homeowners or renters policy in order to qualify. According to Sabbaq, “Recoop wasn’t created to replace typical home insurance, it was designed to cover the gaps and pick up where insurance stops.”

Some common flooding isn’t covered. While claims from coastal storm surges — which Recoop covers — tend to be higher in dollar terms, those from freshwater floods have been far more prevalent, a comprehensive study by Willis Research found. Recoup doesn’t cover damage from freshwater flooding. Nor does the company pay out for coastal floods not associated with an official disaster, such as those triggered by high tides.

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The bottom line on Recoop

With its low coverage limits and policy limitations, Recoop is no substitute for comprehensive home, flood or earthquake insurance. Nor does it offer a last-minute insurance option as, say, a hurricane is bearing down on you; coverage kicks in only after a 14-day waiting period.

Rather, Recoop is a potentially useful (though hardly inexpensive) supplement to bigger policies you carry. In contrast to your home policy, it allows you to make a claim of at least $1,000 without risk of raising your premiums, and without having to cover a deductible. And Recoop promises to pay claims within 48 hours.

Before you consider signing on for Recoop, though, do the following:

Check the details of your home insurance policy. First, confirm the size of your deductible for disasters, since Recoop imposes no such co-payments. Then check the fine print of your coverage. In particular, since non-depreciated payouts are a plus to Recoop, check if you have depreciation protection. (Odds are good that you do, at least in some fashion.)

Shop around if flood or earthquake insurance matters to you. Since coverage of these perils — albeit to a fairly low maximum — is a plus to Recoop, compare what the company offers, and at what cost, compared with standalone policies. Check rates at the modest policy limits Recoop offers and, for the standalone policy, at higher coverage levels — which you may want, particularly if the flood risk for your property is significant.

Consider the personal importance of fast payment. Recoop’s speedy claims settlement is a particular plus if you’d need to dip into savings, even temporarily, to cover post-disaster expenses that are in the four- or low-five figures. On the other hand, if you could carry such spending for up to a month, until regular insurance would pay a claim, this policy perk will be less valuable to you.

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