Even when they recognize a disaster could strike, few homeowners boost their insurance coverage.
Despite the damage inflicted by Hurricanes Harvey, Irma, and Maria, a recent survey indicates that few homeowners take concrete steps to insure against possible hazards even if they recognize that they’re at greater risk.
After polling 1,000 homeowners, crowdsourced insurance rating and educational platform Clearsurance found that only 44% reported filing a claim this year due to a natural disaster. While 94% of those who had filed a claim and 82% of those who didn’t acknowledged that they could be the victim of a catastrophic event, many homeowners failed to undertake measures that would fully insure them when disaster strikes. While 54% reviewed their homeowner policies, only 18% expanded their current coverage levels, and a mere 12% went so far as to purchase a new policy.
Unfortunately, many homeowners may remain underinsured without a thorough audit and update of their policies. Indeed, Clearsurance co-founder and Chief Revenue Officer Todd Kozikowski remarked that the survey’s results indicate that most homeowner policyholders lack sufficient knowledge about what is and isn’t covered under their policies.
Most Common Claims
Throughout the country, wind and flood damage accounted for most catastrophe claims at 28% and 25%, respectively. Given differing weather patterns and geography, payout requests varied by region.
Even before October’s Northern California wildfires, fire-related claims were most common in the West, totaling 25% of claims in the region. The West also registered the greatest percentage of claims resulting from earthquakes, with tremors responsible for 30% of the region’s claims versus 12% for the entire country. Similarly, ice damage accounted for 21% of claims in the Northeast, even though claims caused by ice represented only 10% of the country’s claims.
This summer and fall’s rash of hurricanes and wildfires call attention to the need for comprehensive homeowner insurance that covers all potential risks — even those a homeowner may be unaware of. According to CoreLogic, more than half of all residential and commercial properties damaged by Hurricane Harvey lacked flood insurance. Since these properties were outside the boundaries of the Special Flood Hazard Area, their owners weren’t required to buy flood insurance from the federal government’s National Flood Insurance Program, exposing them to considerable financial losses.
Consequently, many homeowners who didn’t own flood insurance found their properties deluged with water from the storm. All told, CoreLogic estimates that 70% of the damages from Hurricane Harvey are uninsured.
Is the Price Right?
82% of respondents told the Clearsurance researchers that they expect a premium hike in the aftermath of the natural disasters. To make those increases more palatable to your clients, discuss ways to keep premiums manageable while also providing maximum coverage.
Of course, homeowner policies contain deductibles that move in relation to the premium. Your homeowner client may prefer to pay a lower premium in exchange for a larger deductible. If that’s their preference, you should encourage them to build an emergency fund to cover the deductible when a disaster necessitates home repairs or even a replacement. Conversely, other clients may select a higher premium so they aren’t hit with a high deductible. It’s important that they know their options.
Use the ongoing news reports about natural disasters to kick off reviews of your homeowner clients’ policies. Do their policies cover the full replacement cost of their home or just the cash value, which is generally a lower amount? Do they possess liability insurance if someone is hurt on their property after a damaging storm? All of these questions must be answered before the next disaster hits.