Fires & Floods:

Fires & Floods:

The last couple of years have brought many natural disasters including fires, hurricanes and floods.  According to scientists, it is likely that the increased frequency and severity are a result of global warming and most likely will continue. This is having an impact on the insurance industry and will have an impact on all of us through our homeowner’s and renter’s insurance policies. See How climate change is changing your insurance. 

It is a good time to review your insurance needs and seriously consider obtaining a flood insurance or earthquake insurance policy, if you are at risk for those events. Homeowner’s and renter’s insurance policies do not cover most flood and earthquake damage. For Flood Insurance: Knowing When the Risk Justifies the Cost.  

Another consideration in determining if your homeowner’s insurance has you fully covered, is the Loss of Use provision. Loss of Use is a key provision in a homeowner’s policy that provides living expenses to the insured if their home is deemed uninhabitable as the result of a covered peril such as fire or water. It is sometimes called Coverage D and covers expenses including temporary residence, moving costs and transportation among others.  In most policies, loss of use is in two parts – additional living expenses and fair rental value – and is limited to a specific time period.But not all policies are created equal and most homeowners purchase their coverage based on cost, not coverage. So when a fire causes total destruction, the insured might be surprised that temporary living costs are only partially covered.  This limitation can create hardships as people try to rebuild and cover those temporary living costs. Here’s What California Wildfire Victims Should Know About Insurance And Loss Of Use.

If you are impacted by a wildfire or know someone who was affected, it’s important to note that most homes have homeowners policies covering fire damage, but insurers have been steadily imposing homeowners insurance policy limitations (discussed below). This shift of costs to consumers under homeowners’ insurance policies may take some by surprise, since disclosures are often buried in renewal paperwork that consumers may not understand or even read.  The Consumer Federation of America (CFA) urges homeowners dealing with fire losses to be vigilant with their insurance companies to ensure that that they receive a full and fair settlement. The CFA offers tips for consumers filing fire claims on How to Get Full and Fair Insurance Claims Payments in the Wake of California Wildfires. 

From an insurance industry overall viewpoint, Standard & Poor’s states that the U.S P&C sector is well capitalized with record-high surplus levels reaching $761 billion as of 30 June 2018, according to Insurance Services Office, and reported net income after taxes of $34 billion. Per S&P, Re/insurers to absorb wildfire losses but the future a concern.  As S&P credit analyst Stephen Guijarro explains: Given their increased frequency and the lasting effects they leave on the communities’ impacted, weather-related events and catastrophes are a bit sobering for the insurance industry as they underscore the challenges for modeling and covering these risks”.  

The insurance industry’s response to Hurricanes Florence and Michael has received high marks from those affected policyholders. According to the findings of a recent J.D. Power Survey, the industry performed well overall, with 87 percent of survey respondents who had filed a claim in the wake of the storms stating that their insurance company had either met or exceed their expectations. The numbers were even stronger among customers experiencing major damage, with 42 percent of those policyholders rating their insurer a perfect 10. For more: Insurance Industry Kept Promises to Hurricane Victims; Now Tested by Wildfires. 

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