Filed Under:Claims, Catastrophe & Restoration

Despite natural disaster concerns, homeowners aren’t making insurance changes

Opinion

News headlines in 2017 were dominated for weeks at a time with coverage of natural disasters. The total costs of these incidents are likely to make 2017 the costliest year on record for natural disasters. (Photo: AP Images)
News headlines in 2017 were dominated for weeks at a time with coverage of natural disasters. The total costs of these incidents are likely to make 2017 the costliest year on record for natural disasters. (Photo: AP Images)

In a year that's brought potentially unprecedented damage across the United States from natural disasters, consumers surveyed by Clearsurance said they were concerned a natural disaster could also cause damage to their own home. Yet despite 87 percent of respondents expressing concern, very few took action by enhancing their existing insurance policy or purchasing a new one.

Given the number of uninsured and underinsured homeowners during the 2017 natural disasters, there seems to be a disconnect between homeowners understanding their coverage and what their policy actually covers.

Related: Mitigating the No. 1 natural disaster in the U.S.

News headlines in 2017 were dominated for weeks at a time with coverage of natural disasters striking parts of the United States — from Hurricane Harvey flooding homes in Houston, to Hurricane Irma destroying houses in Florida, to wildfires decimating swaths of homes in California. All told, the costs of these incidents are likely to make 2017 the costliest year on record for natural disasters.

Related: State-by-state CAT adjuster licensing requirements

But even with eye-opening photos of these disasters populating our phones, computer screens and newspapers, there still seems to be a sense of complacency among consumers when it comes to taking action to ensure they are properly covered in the event a natural disaster hits their own home.  

Given the prevalence of natural disasters in 2017, Clearsurance published a report after surveying 1,000 participants to learn if they have taken any steps in the last six months to uncover possible insurance gaps.

Clearsurance found that 42 percent of the participants have not taken any steps to check their coverage. So if nearly 90 percent of the participants expressed concern a natural disaster could hit their area, why are so many failing to ensure that they are properly protected?

At least to some degree, policyholders feel they are already properly covered in the event of a natural disaster. Clearsurance found that 65 percent of participants felt they had sufficient coverage.

The trouble with this logic is that although many believe their insurance policy will properly cover them, in reality many will not be properly covered when disaster strikes. Take Hurricane Harvey for example. Approximately 70 percent of the flood damage from Hurricane Harvey was uninsured, according to CoreLogic, a leading source for flood and disaster risk data.

Those 70 percent may enhance their coverage moving forward, but for them, it's already too late. The uninsured damage has been done. If history is any indication, the key for consumers is to avoid being among this 70 percent left staring at a claim that will never be processed or only partially paid.

Related: Closing the protection gap before the next natural catastrophe event

The first, and easiest, step for policyholders to avoid an unpaid natural disaster claim is to call their insurance agent or company and ask about their coverage. If a policyholder is in an area where hurricanes are prevalent, they should be asking questions specific to hurricane scenarios. Are they covered in the event of water damage from a flood? What about wind damage? What are the policy’s limits on rebuilding or repairing? Additionally, the consumer should confirm that the full value of their home is properly insured.

While more than half of the survey participants revealed that they did review their policy on their own or with an agent, only 18 percent enhanced their plan with 12 percent purchasing a new plan.

These low numbers may point to the difficulty many have with understanding their own insurance policy. Most times the policies are long and often contain jargon that’s hard to understand without a background in insurance. Reviewing a policy on your own is a proactive step, but may not be enough to uncover policy gaps in the event of a natural disaster. 

The outcome of these disasters — many uninsured and underinsured consumers — should serve as a call to action for insurers.  They must do more to educate consumers on what is not protected against losses in the policies they purchase.

Todd Kozikowski is the co-founder and chief revenue officer for Clearsurance. He can be reached at todd.kozikowski@clearsurance.com.

See also:

5 types of land development vulnerable to natural disasters

Keep older adults safe in natural disasters with these 7 tips

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