Did insurance companies help or abandon the Hurricane Katrina homeowners?
I work in the real estate industry and am curious if the homeowners who lost their homes to Hurricane Katrina ever got reimbursed by their property insurance companies. Or, due to the enoromous cost, did the insurance companies default out of self preservation? It seems to me that those homeowners who thought their home equity was safe in their homes experienced the biggest financial loss.
Well, neither. They paid out according to their contracts. They REALLY don't pay any flood claims; all flood claims are paid through FEMA, as all flood in the US on homeowners policies are written through the National Flood Insurance Plan.
The truth of the matter is, the majority of damages were caused by flooding, which is EXCLUDED on ALL HOMEOWNERS POLICIES. So, it's not "self preservation" to not pay for something that's not covered!
Homeowners that think that a homeowners policy covers EVERYTHING, need a wakeup call. Here's a list of things that I, personally, have had people scream at me for, even though it's not EVER covered on any policy:
flood – including water damage. People don't realize that flood isn't only water from creeks rising up – it's also water from elevations above you, like rainwater, flowing down – and through your house.
pests – yep, insurance companies won't pay to remove your flea infestations, your mouse problem, your cockroach problems, or even your termites. And they won't pay for any damages caused by these.
pets – yep, your cat pees all over the house, the insurance company isn't going to buy you all new carpet every year, and replace your ruined hardwood floors!! If your dog is always scratching at the door until he shreds it, they don't cover that either!!
rot – most commonly, your 40 year old roof that needed to be replaced 20 years ago. When it collapses under it's own weight, the insurance company isn't going to pay! As a plus, sometimes they will pay for the water damage to your drywall inside the house, from the leaky roof. But maintenance is up to YOU.
trees – they don't clean up fallen trees, unless they land on, and damage, a covered structure. They don't clean up any PARTS of trees, unless they land on and damage a covered structure. This includes branches, and YES! LEAVES! The insurance company will NOT rake your yard every fall! Imagine that!!
mold – well, a very few policies have a very limited amount of mold remediation – like $5,000 – and ONLY after a covered loss. The problem is, mold happens because your house is too moist, or improperly constructed. MOST mold, is NOT that toxic stuff you read about. So just get some bleach out, and clean it up yourself, and find the source of the dampness and get rid of it.
wet basements – yep, most of the time, its NOT a foundation problem, but it can cause them!! High water tables and an improperly sloped house, or clogged rain gutters, or NO gutters, that will do it! Not covered.
paint – you know what, paint is going to wear off, you're GOING to have to repaint your house every 7 – 10 years. Teh insurance company doesn't do it for you. Save up, or get vinyl siding.
You have to do two things: read your policy, and use common sense. Do what you would do to maintain your property if you DIDN'T have homeowners insurance. OK, I'm getting off my soapbox and making supper now.
***BTW – it's not that floods are an "act of god" (which is NOT an insurance term), or that it's not directly covered, it's that FLOOD is SPECIFICALLY EXCLUDED ON EVERY POLICY. PERIOD. Just like War, and Nuclear Radiation.***
They denied as many claims as they could. Since most homeowners policies did not specifically cover flood ("act of god"), the companies said damage was caused by flooding, rather than the combination of wind and storm surge, the break in the levees, or the exposure to the elements after the flood.
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Well, neither. They paid out according to their contracts. They REALLY don't pay any flood claims; all flood claims are paid through FEMA, as all flood in the US on homeowners policies are written through the National Flood Insurance Plan.
The truth of the matter is, the majority of damages were caused by flooding, which is EXCLUDED on ALL HOMEOWNERS POLICIES. So, it's not "self preservation" to not pay for something that's not covered!
Homeowners that think that a homeowners policy covers EVERYTHING, need a wakeup call. Here's a list of things that I, personally, have had people scream at me for, even though it's not EVER covered on any policy:
flood – including water damage. People don't realize that flood isn't only water from creeks rising up – it's also water from elevations above you, like rainwater, flowing down – and through your house.
pests – yep, insurance companies won't pay to remove your flea infestations, your mouse problem, your cockroach problems, or even your termites. And they won't pay for any damages caused by these.
pets – yep, your cat pees all over the house, the insurance company isn't going to buy you all new carpet every year, and replace your ruined hardwood floors!! If your dog is always scratching at the door until he shreds it, they don't cover that either!!
rot – most commonly, your 40 year old roof that needed to be replaced 20 years ago. When it collapses under it's own weight, the insurance company isn't going to pay! As a plus, sometimes they will pay for the water damage to your drywall inside the house, from the leaky roof. But maintenance is up to YOU.
trees – they don't clean up fallen trees, unless they land on, and damage, a covered structure. They don't clean up any PARTS of trees, unless they land on and damage a covered structure. This includes branches, and YES! LEAVES! The insurance company will NOT rake your yard every fall! Imagine that!!
mold – well, a very few policies have a very limited amount of mold remediation – like $5,000 – and ONLY after a covered loss. The problem is, mold happens because your house is too moist, or improperly constructed. MOST mold, is NOT that toxic stuff you read about. So just get some bleach out, and clean it up yourself, and find the source of the dampness and get rid of it.
wet basements – yep, most of the time, its NOT a foundation problem, but it can cause them!! High water tables and an improperly sloped house, or clogged rain gutters, or NO gutters, that will do it! Not covered.
paint – you know what, paint is going to wear off, you're GOING to have to repaint your house every 7 – 10 years. Teh insurance company doesn't do it for you. Save up, or get vinyl siding.
You have to do two things: read your policy, and use common sense. Do what you would do to maintain your property if you DIDN'T have homeowners insurance. OK, I'm getting off my soapbox and making supper now.
***BTW – it's not that floods are an "act of god" (which is NOT an insurance term), or that it's not directly covered, it's that FLOOD is SPECIFICALLY EXCLUDED ON EVERY POLICY. PERIOD. Just like War, and Nuclear Radiation.***
References :
agent, 21+ years
abanndon will my famliy was it was all good until all the talk killed down and they stoped everything
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The insurance companies hid and did a great disservice to their customers. So the great companies like State Farm can split off state homeowner groups in order to default in case in happens again.
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I can tell you a little secret about the insurance companies worries about self preservation.
The large companies like State Farm "expect" every so often to be hit with "catastrophic" claims like Katrina. In fact the economic structure of these companies specifically "set aside" reserves in the millions for such disasters.
Insurance companies have "reinsurance" contracts with large financial institutions (or re-insurance companies that take some of the loss themselves. ie: An example would be that State Farm or whoever would pay for the first 25% of the loss and The re-insurance company wou;ld pay the other 75% of the loss. so in essence the insurance companies have insurance companies. A part of the Homeowners premium goes to pay "the other" company. They call this treaties" They are set up on a annual basis.
Katrina…was in the worst of the worst. Attorneys made more than anyone on the loss. The courts had to determine if Katrina was a "flood" or a "wind" loss. Well it was flood. and some parts it was wind! So….The homeowners policy did not cover Flood … But it did cover Wind!
Anyway….Millions was paid as you know…. the companies had their reserves………A-OK. Unfortunately a couple Re-insurance markets folded…………..But a few more started up !
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Agent 37 years