Natural disasters such as hurricanes, earthquakes, tornadoes, flooding, and fires happen quite often across the globe. All of which have a bad rap sheet of leaving damage behind, causing insurance companies to work extra hard. As a result of this, new research has shown that a good amount of the nation’s housing market is underinsured when it comes to these natural disasters. Here at Building Empires Media Group, we wanted to touch on this issue. Read on to learn more!
Within the past couple years, the cost of rebuilding has increased drastically and continues to increase due to the shortage of labor in the construction industry. When it comes to what insurance covers, the amount the insurance company will offer for rebuilding should increase as they costs increase, shouldn’t they? If insurance companies aren’t factoring this into what their plans cover, then homeowners are going to be left with a huge responsibility under their belt should something like this ever happen to them. The thought of losing your home and all of your belongings in a natural disaster is terrifying and, unfortunately very real. Many people each year have to overcome this obstacle, many of which are left with nothing- making it very difficult to fund a rebuild when not covered under their insurance plan. What is the point of having one if it doesn’t cover you 100%?
Just within the year of 2018, 14 natural disasters occurred including wildfires and hurricanes. All of which cost over $91 billion dollars according to the National Oceanic and Atmospheric Administration. The year of 2018 marked 8 years in a row where natural disasters cause damage in the billion dollar range.
The year of 2018 was also set as the year of highest temperature. This not only acts as a risk for drought but also fires, stronger hurricanes, and more snowfall in the winter months. All of this research and actual events have insurance companies running around recalculating the coverage on homes that may be at loss during disasters that occur. Based on the location and region of your home, the costs of rebuilding may be increased which means insurance companies may be more stingy on the coverage they offer.
Amy Gromowski, senior leader of analytics at CoreLogic stated, “Underinsurance issues can cause financial devastation for property owners, artificially low coverage limits for insurance carriers, and increased loan delinquencies.”
One-time claim problems are expected to be seen as issues, because if building and labor costs are not carefully monitored, insurance coverage and claims may be inaccurate according to your plan. This leave many homeowners with the thought of, what would happen if I was in this situation?
Just within California alone, the cost of labor and materials has increased so much that 110,000 properties were identified as at risk for wildfire with a rebuild cost of $400,000. Costs are significantly higher and who is to say their insurance is properly covering them?
Let’s say that if 1% of homes that were at risk were lost in a wildfire. With an increase of 5.6%, that would cost $25 million if insurance did not cover the damage. That is an unbelievable amount of money, all due to insurance companies underinsured homeowners.
“Homeowners who experience natural hazard events, such as California wildfires, are often struck by personal and financial devastation and many aren’t able to rebuild their homes, which prolongs the regions recovery and often causes homeowners to default on their mortgages” Amy Gromowski also stated. This could not only cause issues in region recovery, but in the housing market if people are becoming delinquent on home loans.
Dependent on where your home is located, go over your insurance plan and what it covers with your agent and clarify that your home is properly insured. Whether you live in tornado alley, in a place at high risk for fires, or on the coastline in route of hurricanes- make sure you and your home will be protected no matter what. We build our homes as our safe place and to be our safety blanket to any and all things that can happen in life, shouldn’t your home be a place you feel protected and safe even in the path of a natural disaster?