Homeowners insurance is a necessary coverage type that can help owners mitigate financial disaster. However, many people underestimate the amount of insurance coverage they need and often find themselves underinsured when a crisis hits. This was evidenced by a number of recent natural disasters, including Hurricane Sandy, wildfire outbreaks in the Midwest and a string of deadly tornadoes that occurred in various parts of the country. When consumers find themselves underinsured, the result is often paying for rebuilding and replacement costs out-of-pocket which can lead to considerable debt and financial hardship. It can also complicate the claims process when owners get in touch with their insurer.
In an effort to circumvent these issues in the face of a disaster, U.S. Rep.Dennis Ross of Florida plans to propose new legislation to help lower insurance costs. The Homeowners’ Insurance Protection Act would establish a federal reinsurance program that would serve to back up existing reinsurance programs, Ross said in a statement. The funds would be used to cover costs in the event of catastrophic losses from a natural disaster. For the purposes of the legislation, “catastrophic” is characterized as “once-in-200-year-storms or higher.” Many states already have this type of reinsurance program, but they would have the option to buy in to a federal program.
“When a once-in-a-lifetime disaster strikes, whole communities are lost, and people want to be begin to rebuild – and they want to rebuild quickly,” Ross said. “Unfortunately, rebuilding is further hampered when insurance costs skyrocket after these tragedies. This is what we saw in Florida after Hurricane Andrew hit in 1992, what the Midwest saw in Joplin after tornadoes ripped up the land, and what we’re seeing in New York and New Jersey in the aftermath of Hurricane Sandy. The Homeowners’ Insurance Protection Act will provide a safety net for insurers and markets, allowing them to provide affordable insurance to homeowners, and allow Americans to rebuild.”
Educating homeowners on their policies
In many instances, homeowners may not be aware that they are underinsured until they are forced to file a claim. As a lack of sufficient coverage can spell bad news for both insurers and homeowners, it’s become more crucial in recent years that insurance marketing agencies better educate clients on their coverage options. Climatologists anticipate that storms and natural phenomena may become more severe in the future, a scenario that may lead to a spike in claims. Ensuring homeowners are sufficiently covered prior to a natural disaster can greatly facilitate the claims process.
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