The recent flooding in and around Baton Rouge and Lafayette, Lousiana led to 13 fatalities, damaged an estimated 60,000 homes and led to about 30,000 people needing to be rescued from the rising waters.
The Federal Emergency Management Agency (FEMA) says 109,398 people or households have applied for housing assistance in the wake of the event, and 25,000 National Flood Insurance Program (NFIP) claims have been filed.
An estimated 75% of the homes in 138,000-person Livingston Parish are said to be a total loss. The American Red Cross called it the worst natural disaster since Hurricane Sandy struck New Jersey in 2012.
Louisiana Insurance Commissioner Jim Donelon has said that only 12% of the homes in hard-hit Baton Rouge were covered by flood insurance and only 14% in Lafayette.
According to media reports, many residents said they weren’t required to have flood insurance and therefore didn’t have it – and didn’t think they lived in a flood zone as many of the areas hit by the record rainfall were not considered “high risk” for flooding.
Very few private insurers even offer flood policies and flood insurance in the U.S. is typically underwritten by FEMA. Homeowners who live in designated high-risk flood zones are required to carry flood insurance if they have a federally backed mortgage.
In Louisiana, FEMA says an estimated 42% of homes in high-risk areas have flood insurance, but only 12.5% of homeowners in low- and moderate-risk zones do have it.
That minority with flood insurance will of course be in a much better place to begin rebuilding while those without it face an uncertain future. The event underscores how unprepared (re: uninsured) most people are for a major disaster such as this occurring in their hometown.
As disaster season peaks, a new national consumer survey commissioned by Trusted Choiceand the Independent Insurance Agents & Brokers of America (IIABA or the Big “I”), reveals that many homeowners lack adequate insurance coverage, do not fully understand their homeowners policies and do not have enough savings to support their households in the event of a disaster.
The August 2016 homeowner survey found:
• At least 73% of respondents don’t have a flood insurance policy that is separate from their homeowners coverage.
• More than 40% of those surveyed don’t have or don’t know if they have coverage that will fully replace their belongings and home in the event of a disaster.
• At least 28% of homeowners polled do not have enough savings to support their households for even one month after a disaster if they had to leave their home. Only one-third said they could support their household for more than three months in this circumstance.
• Less than one-third of respondents have an up-to-date and complete home inventory stored away from their premises.
“Most people think that a basic homeowners policy will cover them in the event of a disaster, however these new findings highlight that a startling number of homeowners have not taken some of the most basic steps to adequately prepare for a disaster such as a hurricane, flood or fire,” says Robert Rusbuldt, Trusted Choice president and Big “I” president & CEO. “This is disturbing as hurricane and wildfire seasons are about to peak, affecting many parts of the country.”
With almost three-quarters of respondents lacking proper flood insurance coverage, they are completely vulnerable and have no protection from damage caused by rising water or flooding including common problems such as seepage of underground water into a home, leaky roofs and toppled trees from saturated soil. According to FEMA, floods are the leading disaster in the United States, and people outside high-risk flood areas file more than one-fifth of all NFIP flood insurance claims.
“It is very troubling—with flooding being so pervasive and hurricane season in full swing—that this large majority of homeowners is risking everything,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “A little planning and knowledge can go a long way. Homeowners should consult with their Trusted Choice independent insurance agent to find out more about flood coverage and other gaps in their insurance.”
The survey also showed a lack of basic understanding regarding standard homeowners insurance coverage. More than one-fifth of survey respondents didn’t know whether they have replacement cost coverage for their belongings and home (which allows them to replace lost possessions with new items) or if they have actual cash value coverage (which takes depreciation of the structure and personal items into consideration). In most standard homeowners policies actual cash value is the default coverage.
“The risk of financial ruin in the event of a major disaster is significantly higher for those homeowners who have only actual cash value coverage because they cannot fully recoup their losses,” continues Flannagan. “Sadly, this survey shows that only 58% have replacement cost coverage. Trusted Choice recommends homeowners purchase replacement cost coverage and take a hard look at their finances to ensure they are prepared.”
Unfortunately, this new research shows that more than half of those surveyed (56%) have just enough savings to support their households for three months or less if they had to temporarily move away as a result of a disaster to their property. Notably, 28% said they couldn’t sustain for even a month. Most alarming, 14% of those surveyed reported that their savings would be drained in less than a week. For off-premises living expenses in these cases, a standard homeowners policy provides only limited protection (usually 10% of the coverage on your home) and a flood policy provides NO COVERAGE.
The survey was conducted for Trusted Choice and the Big “I” by MFour Mobile Research, Inc. Interviews of a nationally representative sample of 1,000 U.S. homeowners were conducted in August 2016 and weighted by age and gender to represent the general U.S. population over age 18. More information about MFour can be obtained at www.mfour.com.
Trusted Choice® educates consumers about the benefits of using independent agents and brokers for their insurance needs: choice of companies, customized policies and advocacy support. Trusted Choice is the consumer marketing identity for more than 26,000 independent insurance agencies and brokerage firms and 70 leading insurance companies. For more information, go to www.TrustedChoice.com.
Founded in 1896, the Independent Insurance Agents & Brokers of America (IIABA or the Big “I”), is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of approximately a quarter of a million independent insurance agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com.
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