Category Archives: Homeowners Insurance

The Week in a Minute, 12/8/17

The I.I.I.’s Michael Barry has been attending the National Association of Insurance Commissioners’ meeting. This week, I.I.I. Daily editor Jennifer Ha picks the week’s most important insurance stories.

  • Record winds are fanning the flames of three major wildfires in Southern California. Already 200 homes and buildings have been destroyed, and tens of thousands of persons face evacuation.
  • Damage claims related to the October wildfires that hit the state’s Wine Country have risen to $9 billion. The state tracks the losses reported to major insurance companies, and the recent losses are far greater than any other wildfire outbreak in state history.
  • The Federal Emergency Management Agency (FEMA) has filed claims with private reinsurers for the full $1.042 billion the agency has in coverage. The claims are being sought to help FEMA recover the losses of the National Flood Insurance Program (NFIP) from Hurricane Harvey. Meanwhile, Congress approved a short-term (December 22) extention for the NFIP.

I.I.I. members receive the I.I.I. Daily for the latest insurance-related news for free. Nonmembers can purchase a subscription. Contact daily@iii.org.

More Wildfires, This Time in Southern California

The worst wildfire season in the history of modern California is taking another bad turn, as three major fires have destroyed more than 200 homes and buildings.

Strong winds will be fanning the flames. The state’s foresters have issued a purple wind alert for Southern California, something they have never done before.

This follows a Department of Insurance report that insurers have incurred more than $9 billion in claims so far from the October fires, being $8.4 billion in residential claims, $790 million in commercial property, $96 million in personal and commercial auto, and $110 million from other commercial lines. County-level details here.

The New York Times has a 2-minute video summarizing why this year’s wildfire season has been so bad.

Their take:

  • Wet winter followed by hot summer. The moisture encouraged plant growth. The heat turned those plants to tinder.
  • Longer fire season, perhaps linked to climate change.
  • Growing residential areas. Development is encroaching on forests.
  • Santa Ana winds. As noted above, the winds are blowing harder this year.

I.I.I. Facts + Statistics on wildfire can be found here. Here’s a prior Terms + Conditions post on filing claims. (It was written for the October fires, but the message will not have changed much.)

California Wildfires: What’s Next?

More than a dozen fires have burned more than 1,500 structures in Northern California, with more than a dozen dead as of Tuesday afternoon.

CNN lays down the facts:

  • More than 119,000 acres burned, much of it in wine country – Napa and Sonoma counties.
  • Fires surged behind hurricane force winds (79 mph gusts) – about the same speed as Hurricane Nate at its landfall a few days ago.
  • Nearly 35,000 are without power.
  • No rain is forecast for the next seven days.

Cat modeling firm RMS notes that the fires, taken together, are already the fifth most destructive in state history, as measured in the number of homes destroyed.

The Insurance Information Institute has background information on wildfires here.

The The Insurance Industry Charitable Foundation (IICF) has opened the IICF California Wildfire Relief Fund to assist in the growing need across the state.  To donate click here.

Our thoughts obviously are with all of the families in peril right now.

Janet Ruiz, I.I.I.’s California representative, notes that wildfires differ from other catastophes like hurricane or tornado, in that the loss is more likely to be a total loss — the entire home burns along with its contents. Compounding the tragedy, often that includes the receipts and other evidence of ownership that make it easy to document what has been lost.

Her other thoughts:

  • Coverage for alternative living expenses (reimbursement while waiting to return home) may be available through your insurance company. Money you spend on housing, food, clothing, etc as a result of a mandatory evacuation may be covered.
  • After you have returned, report your claim right away to your insurance company. Insurers have multiple tools available to handle claims. Many will be onsite at local assistance centers or processing claims via mobile apps, online claims, call centers and more. Call your agent if you need additional assistance. Insurance companies are also proactively reaching out to people they know are in affected areas and may have a loss.

 

The October issue of Latest Studies

The October issue of our Latest Studies digest is now available.

In this issue:

  • Wharton, The Congressional Budget Office and B.E. Journal of Economic Analysis & Policy all have recent reports on the National Flood Insurance Program
  • Lloyd’s of London on the future of cargo insurance
  • The latest on marijuana impaired driving from the National Highway Traffic Safety Administration
  • J.D. Power on U.S. homeowners insurance customer satisfaction

And more…..

Insurance and disaster aid for non-U.S. citizens

Our Communications department has received questions from Canadian news outlets on behalf of Canadian citizens who own homes in areas affected by either Hurricane Harvey or Irma. Here are some of their questions and the answers we found.  Of course, the answers below also apply to other non-citizens who own property in the U.S.

Q: Can Canadians qualify for a Federal Emergency Management Agency (FEMA) grant?

A:  It depends. To be eligible for assistance from FEMA, at least one person in the household must be a U.S. citizen, Qualified Alien or noncitizen national with a U.S. Social Security number.

Q: Can Canadians purchase a FEMA National Flood Insurance Program (NFIP) policy?

A: Yes. Anyone who owns property in the U.S. can buy a FEMA NFIP policy as long as their property is in a participating NFIP community. They should be able to buy excess flood coverage if the event they want policy limits above a beyond what FEMA’s NFIP offers ($250,000 for dwelling protection, and $100,000 for the dwelling’s contents).

Q: Can Canadians purchase a policy from Florida’s Citizens Property Insurance Corp.?

A: Yes, it appears. We found no restrictions on the citizenship of the buyer. To find out more about Florida Citizens’ eligibility requirements click here.

Hurricane Irma Loss Estimates, 9/13/17

We’ve chronicled loss estimates from Harvey. Here we’ll do the same for Irma.

Karen Clark

As of 6 p.m. 9/13, Karen Clark estimates :

  • Total insured loss of $25 billion, being
    • $18 billion in the United States, mainly Florida but also Georgia, South Carolina and Alabama.
    • $7 billion through the Caribbean.

Business Insurance notes:

Estimates include losses to buildings, other insured structures, contents, business interruption and autos, but do not include crops or losses covered by the National Flood Insurance Program.

RMS

As of 2:30 p.m. 9/10, RMS estimates:

  • 10 percent chance that wind losses will exceed $60 billion. (This estimate has been falling the past couple of days, as the storm has tracked away from the Miami/Fort Lauderdale/Palm Beach corridor.)
  • This doesn’t include:
    • Post-event amplification (demand surge), which could add as much as another 15 percent, depending on how the storm plays out.
    • Storm surge, which could add another 30 percent.
AIR

As of 5 p.m. 9/10, via press release:

  • Total US Insured Losses: $20 billion to $40 billion.
  • This estimate did not include any mention of insured losses in the Caribbean, which were estimated between $5 billion to $15 billion, according information in a prior AIR release.
  • Here at I.I.I., we’ll note that a $20 billion loss would make the storm one of the three worst insured catastrophes in U.S. history, even after accounting for inflation.

As of 3 p.m. 9/9, via CNBC:

  • Total Insured Losses: $20 billion to $65 billion.
  • U.S. Insured Losses $15 billion to $50 billion

Understanding Hurricane Deductibles

With Texas still dealing with the remnants of one major hurricane and Florida about to contend with another, Thursday’s Wall Street Journal called considerable attention to hurricane deductibles:

These deductibles were widely put in place after Hurricane Katrina in 2005 and have been standard in many states for years. But they have rarely been triggered on a large scale because few hurricanes have landed in the U.S. over the past decade.

The Journal article called them “little known provisions that allow insurers to shift thousands of dollars of damage costs” onto homeowners. Most industry experts would quickly point out that this reduces premiums – by hundreds of dollars a year in hurricane-prone states like Florida.

A recent poll by the Insurance Research Council found that about a third of coastal residents were unfamiliar with hurricane deductibles. (The flip side, of course, is that two-thirds were familiar with them – less than anyone would like but comparable to what the public understands about other insurance concepts.)

The concept is simple: To limit their exposure to catastrophic losses from hurricanes, insurers in coastal states sell homeowners insurance policies with percentage deductibles for storm damage instead of the traditional dollar deductibles, which are used for other types of losses such as fire damage and theft.

The deductible is a percentage of the insured value of the home.

Here is an example of how a percentage deductible works: if a policyholder has a $5,000 covered loss and a 2 percent deductible and the insured value of the home is $200,000, then the insurance company will pay $1,000. The remaining $4,000 is he amount of the deductible (2% of $200,000 = $4,000).

Beyond the simple concept are many permutations from state to state. The deductible is reviewed by state insurance departments and may be subject to various laws and regulations. The details are spelled out on the declarations page of homeowners policies, generally one of the first pages of the document. (It will be clearly marked near the top.)

Below is a primer on deductibles and specifics for Florida and Texas – two states where the deductibles may become an issue in the coming weeks.

FLORIDA
By Florida law, application of deductible is triggered by windstorm losses resulting only from a hurricane declared by the National Weather Service. Such deductibles apply for damage occurring from the time a hurricane watch or warning is issued for any part of Florida, up to 72 hours after such a watch or warning ends, as well as any time hurricane conditions exist throughout Florida.

Deductibles are set by law and may only apply once during a hurricane season. All insurers must offer deductible of $500, 2 percent, 5 percent and 10 percent of the policy dwelling or structure limits, with percentages based on the home’s total value. Regardless of percentage, the deductible must be stated in the policy as a dollar amount. This is true for both private insurers and the state-run Citizens Property Insurance Corp., which insurers many homes in high-risk areas. See website for details.
Additional resources:

The Florida Insurance Council

Florida Office of Insurance Regulation

 

TEXAS

Texas insurance policies differ from most states because they can offer three types of deductibles: one applied to typical losses like fire; one applied to losses from nonhurricane windstorms and hail; and one applied to hurricane losses.

The hurricane deductible is calculated as percentage of dollar amount of coverage on a dwelling. The trigger varies by insurer, but is generally when the National Weather Service issues a hurricane watch or warning and it remains in effect for a specified amount of time after storm has passed. Intensity of hurricane may also affect the trigger.

Some insurers require a hurricane deductible to be a percentage of the insured value, but by law it must be shown on the insurance policy as a dollar amount.

Beach or FAIR Plan
The Texas Windstorm Insurance Association (TWIA), provides wind and hail coverage when it is not available in the insurance marketplace for 14 counties.  The Texas FAIR plan operates statewide, but cannot provide wind and hail coverage in areas that are eligible for inclusion in the TWIA. TWIA covers only 14 coastal counties and five communities in Harris County [Galveston Bay].
The deductibles can vary by the type of residence:

  • Residential Dwelling or Farm and Ranch Dwelling – Standard deductible is 1 percent (with $100 minimum); Optional deductibles range from $100 to $250 and from 1.5 percent to 5 percent.
  • Mobile Home deductibles are 1 percent (with $250 minimum) – For property located inland of the intracoastal waterway or seaward of the intracoastal waterway and protected by an approved seawall; or 2 percent (with $250 minimum) for property located seaward of the intracoastal waterway and not protected by an approved seawall. See website for details.

Additional Resources:

Texas Department of Insurance

Office of Public Insurance Council

 

Harvey vs. Irma: Every Hurricane is Different

Hurricane Irma begins its assault, while Texas and Louisiana begin the long road to recovery from Hurricane Harvey.

No one, of course, knows exactly what damage Irma will unleash, but it is likely to be quite different from what Harvey wrought. That’s because no two storms are alike.

Business Insider touches on the differences:

While Harvey’s record rains drenched southeastern Texas and western Louisiana, flooding Houston in over 4 feet of rainfall, Irma’s winds — if they stay as strong as they were on Tuesday evening — could flatten buildings, trees, and power lines on the Caribbean islands it’s threatening to devour.

At its peak, Harvey was a Category 4 hurricane on the Saffir-Simpson scale, but its weakened winds downgraded it to a tropical storm the day after it made landfall. Irma, meanwhile, is a Category 5 monster that’s already one of the strongest Atlantic hurricanes ever recorded — and it’s still strengthening.

Meanwhile, Live Science laments the problems with shoehorning all the complexities of a hurricane into a single number, like Category 5.

As a Category 4 storm, Harvey’s winds meaning landfall blew between 130 and 156 mph. But catastrophe modeling firm RMS said the storm packed only one-fifth the total energy of Hurricane Ike, a Category 2 storm that struck the same area in 2008.

Harvey became an enormous flood because the storm lost almost all its forward momentum upon reaching land.

Meanwhile Irma is among the most powerful storms ever to cross the Atlantic, but doesn’t threaten a Harvey-like deluge. It is delivering, however, bark-shredding winds that will cause catastrophic damage.

Both storms, though, are tragedies.

Harvey survivors can learn more about filing flood insurance claims here. They can learn about filing other insurance claims here. For other types of federal disaster assistance, click here.

If you are bracing yourself for Irma, FEMA has advice here.

Irma strikes Leeward Islands, Forecast to Turn North Toward Florida

Associated Press (via NY Daily News):

The most powerful Atlantic Ocean hurricane in recorded history made its first landfall in the islands of the northeast Caribbean early Wednesday, churning along a path pointing to Puerto Rico, the Dominican Republic, Haiti and Cuba before possibly heading for Florida over the weekend.

The eye of Hurricane Irma passed over Barbuda around 1:47 a.m., the National Weather Service said. Residents said over local radio that phone lines went down. Heavy rain and howling winds raked the neighboring island of Antigua, sending debris flying as people huddled in their homes or government shelters.

CNN notes that the eye of the storm was bigger than the island of Barbuda.

The forecast is for the storm to swing north toward Florida, as you can see in the National Hurricane Center cone illustration above. A South Florida strike is forecast four or five days from now.

FEMA – the Federal Emergency Management Agency – has information on how to prepare for a hurricane.

Hurricane Irma: Still a Threat

Sunday night, as Hurricane Irma toggles between Category 2 and Category 3, Weather Underground gives us the . . .

Bottom line: Irma is a growing threat to the Leeward Islands, the Greater Antilles, and the Eastern Bahamas. Irma is expected to be drawing closer to the East Coast as a powerful Category 4 hurricane this weekend, but it is still too soon to predict the timing and location of any potential landfall with confidence, and it is still possible Irma will move out to sea.

Do you have a hurricane plan?

  • Yes: Make sure it is ready to go.
  • No: Here are some basics on what you need.