Author Topic: Debbie says millions of property owners will soon find out they are uninsured  (Read 87 times)

rcjordan

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I haven't confirmed this, but I suspect it's true

'Standard homeowners insurance in NC doesn’t include flood coverage
and rain from a hurricane leaking into a door and gaps in the siding
is considered “flooding” and not “hurricane damage”'

https://old.reddit.com/r/NorthCarolina/comments/9gqumf/til_standard_homeowners_insurance_in_nc_doesnt/

ukgimp

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Forecast = Chance of Riots?

Brad

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Forecast = Chance of Riots?

At the least, insurance adjusters won't be driving around with insurance company signs on their cars.

aaron

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Standard policies typically do not cover that on the basis that the property damage is highly localized, which could put insurance companies out of business.
http://www.iii.org/article/does-my-homeowners-insurance-cover-flooding
Quote
It's important to note that, as a rule, homeowners and renters insurance does not cover damage from flooding. To protect your home, be sure to understand the risk of flooding and what your insurance options are. … Flood insurance is available for renters as well as homeowners, but a special policy is required as flood insurance—like earthquake insurance—is not part of standard homeowners coverage.

Some of the highest risk areas have federally subsidized flood insurance
https://www.marketwatch.com/story/10-things-politicians-wont-tell-you-about-femas-flood-insurance-2017-08-28
where other poorer homeowners (who may often have their own claims denied)
https://www.cbsnews.com/news/national-flood-insurance-program-meant-to-help-victims-spends-millions-fighting-claims/
are subsidizing the sort of low lying multi million dollar waterfront mansions of others.
https://www.salon.com/2013/10/30/the_1_percents_flood_insurance_scam/



I think the other one which is not covered by default (for the same reason, highly localized damage that could put an insurance company under) is earthquakes.
https://www.iii.org/article/background-on-earthquake-insurance-and-risk

Even coverage of volcano eruptions has gotchas in it
https://www.iii.org/article/volcanic-eruption-coverage
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Most home, renters and business insurance policies do not cover damage from earthquake, land tremors, landslide, mudflow or other earth movement regardless of whether or not the quake is caused by or causes a volcanic eruption. Earthquake insurance is available from private insurers as an endorsement to a homeowners policy, and in California from the California Earthquake Authority, a privately funded, publicly managed organization.

Volcanic Effusion (i.e. volcanic water and mud) is not covered under a typical homeowners, renters or business insurance policy. However it is covered by flood insurance, available through the National Flood Insurance Program.
« Last Edit: September 18, 2018, 06:35:08 PM by aaron »

rcjordan

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rain from a hurricane leaking into a door and gaps in the siding is considered “flooding” and not “hurricane damage”'

That's the part that bothers me, if true. To my mind, it's an obvious, illogical loophole to dodge claims.

ergophobe

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Some of the highest risk areas have federally subsidized flood insurance

And some people have rebuilt 4-5 times. The national flood insurance kitty is dry. The main reason is that the rates are "not actuarially sound and do not reflect the inherent flood risk."
http://www.ironshore.com/blog/2017-reauthorization-and-future-viability-of-the-national-flood-insurance-program

It seems obvious that there should be some provision in the policy that if your house located on a spot that has flooded in the last X years (say 10?), your policy pays out cash, but will not pay to rebuild your house on that spot or within any other flood plain.

Otherwise, someone like the person on the radio who had just had his house destroyed for the fourth time, would be paying 20% of the home value in annual premiums.

Even so, the nature of flooding (and with some of the recent fires, perhaps fire too), is that localized losses are so big that few private companies can pay out at that scale. So it's not unreasonable to me that there would be something like FDIC, but the current system where people pay way below actuarially sound levels just doesn't make sense.

I don't know much about that, but I have thought a lot about the cost/benefit of fire insurance.

We pay about 1.6% of our home's value ever year in fire insurance. Close call this year, but this subdivision has been here since 1966 with only one home lost to fire (operator error on the part of an appliance repairman). That's 53 years. At this premium, it would be about 62 years to breakeven for the insurance company. So in theory, if we had burned down this summer, we would have gotten a deal :-)

We have some houses near us that are owned as a small part of a large part of an investment portfolio. I found out during this fire that they self insure. In their investment calcs, it isn't worth paying.

The question is, on a warming planet where storms and fires are getting more severe, is 1.6% enough?

Currently, it is estimated that 50% of all homes in the Western US are at risk of wildfire. So basically, at my rates, insurance companies would have to see 0.8% of houses destroyed every year before they lost money. That would surprise me, even accounting for climate change and changing development patterns.

I don't know how the math would work out for flood insurance. But it seems like it's mostly a political problem, not a math problem.

rcjordan

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Many of the states have to form an insurance pool to underwrite the policies because consumer insurance companies withdraw from their market and housing -actually mortgages- tank.  Florida, North Carolina, and other coastal states back hurricane insurance. I suppose HI backs volcano insurance and Cali backs earthquake?  Politics set in and the pools are typically "not actuarially sound."

About 3 years ago, a large number of homes in Vegas were flooded by a freak rain. None of them had flood insurance, nor would I if I had a property there.

>self-insure

I generally self-insure. The exceptions are for personal liability, homeowners, and medical. That's a lot of exceptions, but most families seem to keep much more insurance, particularly vehicles & life.

Brad

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With rising sea levels I expect the Feds to start withdrawing Fed. Flood insurance from the coasts and some river areas.  It will be a gradual phaseout.