Inside Insurance: Hurricane Isaac and insurance coverage lessons

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Hurricane Isaac managed to get the attention of people in Florida, Georgia, Alabama, Mississippi and Louisiana as it crossed the Gulf.

Some southern Louisiana homeowners saw water up to their rooflines. Reporters were standing in waist-deep water to do their video reports. Other reporters were hardly able to keep their balance at the height of the hurricane.

While evacuations were ordered on the Gulf Coast, many decided not to go, creating problems for law enforcement and emergency responders – not to mention the danger those people faced as conditions worsened.

As the storm moved on through, the focus shifted to dealing with property and vehicle damage from high winds, flooding and related issues. Law enforcement, emergency services and insurers get to the scene as soon as possible, along with rip-off artists charging exorbitant fees for tree removal, roof repair and general restoration work.

According to the Insurance Information Institute, wind damage from tropical storms and hurricanes is covered under standard homeowners and renters insurance policies. This includes damage to both the structure and personal possessions. Ninety-seven percent of homeowners have homeowners insurance, but only 29 percent of renters have renters insurance. Gulf coast residents likely have higher homeowner deductibles because of the increased risk of such storms.

Flood damage is generally not covered under standard homeowners and renters policies. A separate flood insurance policy can cover losses resulting from heavy or prolonged rain, coastal storm surge and failure of levees or dams. The National Flood Insurance Program provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. Flood insurance is also available from some private insurers.

While flood insurance for homeowners and renters is available, only 13 percent of Americans purchase this coverage, according to a survey by the Insurance Information Institute. The number of flood insurance policies increased in Louisiana and Mississippi after Hurricane Katrina in 2005, but declined in subsequent years, while the number of flood insurance policies rose in Alabama post-Katrina.

Renters – whether in apartments, condos, townhomes or single family houses – often don’t know that the property owner is responsible for the building, but the renter is responsible for personal belongings and liability that may occur within the rented unit (that includes theft). Renters insurance is very inexpensive compared to the owner’s insurance because there is no building involved.

Damage to cars from wind and flooding is covered under the optional comprehensive portion of an auto insurance policy. More than 75 percent of all Americans choose to purchase comprehensive auto insurance coverage.

As in all disasters, the financial impact to property and individuals will be the next important issue on which to focus.

DAVID COLMANS IS THE EXEC-UTIVE DIRECTOR OF THE GEORGIA INSURANCE INFORMATION SERVICE. CONTACT HIM AT (770) 565-3806 OR DCOLMANS@GIIS.ORG.


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