Insured Against LIKELY Disasters? Many Are Not.

Straight from another article I wrote, here is my definition of prepping:

Obtaining information on and preparing for low probability / high impact events as well as high probability / low impact events while taking into consideration (and always improving upon) one’s resources and personal requirements in order to live a more stable and predictable lifestyle if and when a deviation from normality occurs.

Focus if you will on this key phrase: high probability, low impact events.  These are threats that we all face on a regular basis, maybe a seasonal basis:  stock market slide (impacting your retirement), housing crisis, hurricanes, tornadoes, flooding, wildfires or even that extended power outage.  When thinking about preparedness these are the events that should take up most of our time and effort, this versus stockpiling ammunition because “it will be currency when everything collapses after the EMP strikes.”  Not saying that last scenario is beyond the possibility of reason but I place that firmly in the low probability sector.

Let’s Talk Data

Background:  I recently attended a local symposium related to the wildfire threat in our area.  One of the speakers mentioned just how underinsured folks are (for any number of reasons) and how after a recent large fire, upwards of 60% of the folks WHO DID HAVE INSURANCE did not have enough to rebuild their home.  That was shocking and upon further research, here’s more data that I found.

Wildfire: Source: Investopedia

The high percentage of homeowners who do not or will not get enough of a payout from their insurer to rebuild their home is “frighteningly consistent,” across surveys and input from other data, according to Amy Bach, the veteran executive director of United Policyholders, a nonprofit insurance consumer advocacy organization for insureds.

Earthquakes: Source: PLMR.com

But despite this risk and the enormous costs of rebuilding, Californians remain dangerously under-prepared for future earthquakes.

Approximately 90% of Californians have no insurance coverage against earthquake damage to their homes, putting them at serious risk of financial ruin after the next disaster strikes.  The lack of insurance coverage would potentially leave the state in physical and economic ruin.

Hurricanes: Source: CNN Business

Homeowners could be hit with as much as $17 billion in uninsured losses due to flooding from Hurricane Ian due to the latest estimate on damage caused by the storm.

The damage estimate comes from CoreLogic, a leading research firm that tracks and estimates the cost of damages from natural disasters. It puts uninsured flood losses at between $10 billion and $17 billion, which nearly matches the insured flood losses of between $8 billion and $18 billion.

Prepare for Localized Disasters

There are a few key points here.  Understand the environment where you live and get prepared for those localized disasters whether it be extra food, water, medical, community or what have you.  The second is the follow up to the disaster, where do you stand insurance wise?  Should the worst case scenario happen are you covered?  What if it takes a year to rebuild your home, is that covered and for how much?  What about your personal property, when and for how much is that paid out for?

Talk to your Insurance Agent

I spent 30 good minutes on the phone with my insurance company trying to get a grasp of what my coverages were, the limits and all of the “what if’s.”  Sure I had coverage that was demanded by my mortgage company but as the articles I’ve linked to above show, just because one has coverage does not mean it’s enough.  I wanted to know if my house burned down tomorrow, if material prices increased by 30%, if my home took 1 year to rebuild and I had to rent and if my personal belongings amounted to half a million (example): was I covered, how and when would I get paid, is it written in the contract.  I heard what I needed to and now feel much more at ease with respect to all of these questions.  It should be noted that I have USAA which in the almost 30 years I’ve been with them…have been absolutely incredible.

The Bottom Line

When many folks think of preparedness the immediate thing that comes to mind is stockpiles of guns, ammo, food storage and an underground bunker.  While some of those things are legit, cool, something to aspire for the basic prep strategy should include strategies that allow for survival / sustainment after a highly probable disaster, insurance being one of them.  Check yourself and don’t assume and absolutely do not rely on FEMA or Government assistance should the worst case happen.  Take matters into your own hands.