Rise in Natural Disasters Leads to Insurance Deficits

by Nicole Nouhra

Disasters Increasing in Frequency and Severity

Natural disasters in the United States are increasing in both frequency and severity. Since 2009 the number of catastrophes has doubled and the claims dollars paid out has quadrupled as reported by The Insurance Information Institute. Last year, California experienced some of the deadliest and most destructive wildfires with disasters striking from Northern California all the way to Ventura and Los Angeles Counties. With a higher potential home risk than ever, there has never been a smarter and more pressing time to make sure all of your valuable assets are insured.

Unfortunately, the rapidly increasing destruction of wildfires and other natural disasters is also making it harder and more costly than ever for people to obtain the insurance they need to adequately insure their possessions. According to a recent article in the Los Angeles Times, “Insurance claims have topped $12 billion for the November wildfires in California, making them the most expensive in state history.” These drastic changes in insurance market trends and laws make it exceedingly important to stay current and informed.

Here is what you need to know about the latest statistics and what you can do to protect what matters to you.

Insurance Supply and Demand

This increase in the number of these incidents across the United States has caused more than a little concern among in-the-know homeowners. Between the years 2008 and 2017, natural disasters nationwide have increased from 36 to 46 events per year and insurance claims have risen from 4.1 cases to 5.2 million. This trend shows no signs of stopping. The state of California has never been a stranger to natural disasters with earthquakes, droughts, fires, and floods constantly threatening its communities.

In 2017 CA ranked #4 on the list of top states and territories of insured catastrophe losses leading to 173,650 million reported claims. With record-breaking fires and losses over the last two years, there is no decline in sight. According to the LA Times article, just last year the recent Camp Fire “killed 85 people and destroyed nearly 19,000 structures” in the Northern California city of Paradise. Additionally, these catastrophes are impacting buildings that remain standing through smoke damage, soot and ash, utility outages, and rescue efforts. To add to this, areas hit hard by fires during heat waves are now at higher risk for floods in the rainy season. In these increasingly unpredictable environments, savvy individuals must remain prepared. Along with having planned disaster procedures in place, keeping backup food, water, and medical supplies on hand can help save lives in times of crisis. Ensuring ahead of time that you are covered by the correct insurance policies can help rebuild your losses after the damage has been done.

Insurers Becoming More Conservative

While deadly and destructive California wildfires make it inordinately important to have comprehensive insurance, quality policies have become increasingly more expensive and difficult to obtain. With natural disaster claims reaching an all-time high, the insurance forecast indicates that prices will continue rising. On top of this, many insurance companies have begun to non-renew policies, leaving property owners that were once safely covered in a lurch.

Additionally, insurers are beginning to shy away from homes in brush or high-risk areas, scrutinizing homes with non-CAT claims, and offering only limited availability for homes above $2.5 million. This trend is causing homeowners to rely more frequently on non-admitted insurers to play a bigger role.

Choosing Wisely

Despite the increasingly hard-to-navigate road to finding insurance for your home and assets, there is information you can use to make sure you choose the insurance options best suited for your needs. When searching out coverage options, never choose an insurance company based on price alone. Be sure the company you choose is one you can trust with all of your property by studying the AM best and financial stability ratings. Accept nothing lower than an A- AM best rating and consider nothing below a size VII financial size category ($50-100M). Be aware that you should always look for insurance companies with a proven claim track record.

Remember that as insurance becomes increasingly more difficult to get, it is important to act as soon as possible to increase deductibles and to avoid making small claims. While cost is always a consideration, keep in mind that cutting corners in coverage can be a pricey mistake later down the road.

Important Considerations

Most importantly when you approach insurance options, consider everything you have worked so hard to build. You deserve to know that your home, your specialty items, and your valuable assets are safely covered. Many homeowners believe their standard insurance policies are sufficient to cover their assets and are often surprised by limitations set by insurance companies that stop short of replacing many of their valuable items.

In the aftermath of recent disasters, many policyholders have been forced to sue insurance companies after finding themselves severely underinsured, unable to replace their belongings or even pay their mortgage. Due to set limitations, it is even more important for high net-worth policyholders to ensure that the things that matter to them are fully insured.

  • Pay close attention to your dwelling limit and extending replacement cost. Always choose “guaranteed”, but nothing less than 50% extended replacement options (if available) to get the best coverage for the structure.
  • Remember that if a disaster does strike, your home you will have a significant amount to recover. Items such as high-end furniture, clothing, and collectibles are not only difficult to replace but costly as well. Take your cell phone and video each room and closet in your house so if you are required to provide an inventory you will be able to do so.
  • Take stock of any special articles you want to protect and purchase supplemental insurance for your important investments. Give extra consideration to secondary homes or properties that might require additional care. Remember that temporary housing during evacuation or displacement can also be expensive. It is important to choose a policy that considers your comfort and the comfort of your family during these times as well.

State Support for Victims

Although insurance coverage seems harder than ever to maneuver, recent changes in California state policy have been made that aim to support wildfire survivors. Recently, five bills have been passed extending policyholder rights, including SB 894 which gives homeowners the option to move losses associated with their additional structures to their primary dwelling within their homeowner policy to help offset some of the underinsured amounts of their home.

Additionally, under SB 894, homeowners are given three years to use additional living expense coverage and are guaranteed two renewal offers instead of one. Other examples of these new California laws are SB 1772, which extends the time allotted to rebuild property from two to three years, and SB 1800 that requires the insurer to pay out the full extended replacement cost benefit covered under the provisions of a plan, regardless of whether the policyholder chooses to rebuild at the same location, a new location, or purchase an already-built home. Keeping up to date and informed about your rights and options will help you rebuild faster and stronger after an incident.

Preventative Measures

In addition to covering your property for what could happen, there are also steps you can take to help prevent fire damage from happening in the first place.

  • Whenever possible, opt for fire-resistant landscaping and use non-combustible construction.
  • Install ember-resistant venting in your home.
  • Keep up on property maintenance by cleaning your roof and gutters regularly and cutting overhanging branches away from the roofline.
  • Always store firewood at least 30 feet from your home to eliminate unnecessary hazards.
  • If a fire does break out in your area, it’s acutely important to be prepared to leave immediately if necessary.

Look for the latest updates from your local news media and fire department to know what steps you should take. Prepare for evacuation by:

  • Rounding up family pets, closing windows and doors – including garage doors
  • shutting off pilot lights, air conditioning, and gas at the meter, making sure sprinkler systems are off
  • moving patio furniture and doormats away from your structures
  • leaving outside lights on
  • Back cars into your driveway with the keys inside and prop gates open to ensure a quick departure if need be

Remember that if you are ordered to evacuate, do so immediately. Following these tips can help to save your most cherished possessions and irreplaceable memories and most importantly, get you and your loved ones to safety.

The Importance of Expert Advisors

When it comes to protecting your and your legacy, it is crucial that you have expert advisors to turn to. High net worth property owners have unique insurance needs that call for wider considerations and a more personalized approach. Premier Private Client is the authority on curated, high net worth insurance solutions. As an independent, full-service insurance brokerage and consulting firm specializing in custom-tailored insurance programs, our aim is to protect high net worth clientele from the particular risks associated with valuable assets. With 25 years of exceptional industry experience, Premier Private Client caters to those clients who require distinctive attention when seeking insurance programs to preserve their wealth and protect their families. As natural disasters continue to threaten our environment, there has never been a greater need to protect your investments. To set up a complimentary Premier Lifestyle Risk Assessment, request information, please call Nicole Nouhra nicolen@chivaroli.com 805-371-3680 or toll-free (800) 240-CHIV.

Nicole Nouhra Chivaroli

Nicole Nouhra CPRM, CISR, CAPI

Managing Director | Chivaroli Premier Insurance Services

p. 805.371.3680 | c. 818.535.3281

nicolen@chivaroli.com | chivarolipremier.com


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