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How to get (financial) protection from a storm

Just because you may not live on the Gulf Coast, don’t think a tragedy like Katrina couldn't happen to you. Jean Chatzky has insurance advice.

The winds from Hurricane Katrina have finally died down, but the final price tag is a still a long way from being counted. One thing is certain: It will be a doozy.

According to the Insurance Information Institute, Katrina stands to cost somewhere between $12 billion and $26 billion in total (with some estimates putting it as much as $30 billion). To put that in perspective, the all-time most expensive hurricane on record, Hurricane Andrew, cost $21 billion in today's dollars.

Of course, unless you're on the Gulf Coast, you're not feeling much of that financial pain. But telling yourself that a hurricane will never hit you at home, whether you live in New York or anywhere else on the East Coast of the United States, is like telling yourself a fairy tale. Anyone remember Hurricane Floyd? It certainly did a number on my basement (I live just north of the city). Hurricane Donna in 1960 and the Great New England Hurricane, which struck in the summer of '38 were worse. That's why Jeanne Salvatore, a spokeswoman for the Insurance Information Institute, says, "Consider this a wakeup call. Make sure you're covered in case next time the storm hits closer to home."

What do you need to do?

Re-read your homeowners policy. You're in the best shape if you have replacement-cost coverage (which pays the cost of rebuilding the structure and replacing your belongings) rather than cash-value coverage (which pays the current, depreciated value). If you've taken advantage of record low interest rates to make improvements to (or refurnish) your home and haven't let your insurance company know, do that as well. You may need a bump in the value of your policy.

Focus on your "hurricane deductible." Every East Coast homeowner's insurance policy has one, says Salvatore. Essentially, what it says is that if a hurricane hits, your dollar-value deductible goes away and a percentage-based deductible kicks in. Percentages vary widely, however — from 1 percent to 5 percent — as do definitions of how bad a hurricane has to be to force a change in your policy. If you don't like the sound of your policy's definition, now's the time to shop around for other coverage.

If you rent, make sure you have renter's insurance. There's really no excuse. Not only is it cheap ($200 to $300 a year, typically), but it will pay for temporary quarters if a hurricane forces you out of your house.

Consider flood insurance. In many parts of the country mortgage lenders don't force you to buy flood insurance (in addition to your homeowner's policy) before they'll grant you financing. But that doesn't mean you shouldn't. The risk of flooding exists in places where it didn't in previous years. Why? Development. You can build a shopping mall on wetlands, but eventually the water has to go somewhere. And if you're not in an area that is considered high-risk, the cost of flood insurance — $400 on average, annually, nationwide — will likely be much less.

Finally, have a game plan. What happens if you do have damage from a hurricane or other storm? Call your agent or insurer immediately. Let him or her know the extent of your damage and where you can be reached if you're forced out of your home. Document everything — take pictures, gather receipts and write an extensive list of property and items that have been damaged. If you are in a position to make temporary repairs, go ahead. Just make sure to keep receipts for what they cost so you can get reimbursed. And last but not least — don't fall into the arms of any contractors who ask for money upfront to start fixing things immediately. Scam artists, unfortunately, come out in droves at times like this. You don't need to be their prey.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright ©2005. For more information, go to her Web site, .