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The Issues of Underinsurance

Homeowners across the United States and Puerto Rico have learned the hard way about the true nature of their insurance policies this last year. Three hurricanes - Harvey, Irma, and Maria - devastated homes in Texas, Florida, and Puerto Rico. Although these tragedies have raised awareness for some, many people across the nation remain uninsured.

Home insurance is practically essential and while most people have it, flood insurance is where they come up lacking. This can be confusing because flood insurance is a completely different policy that is purchased from the US government, rather than from a private insurance company. People often think that their home insurance covers all calamities a house can suffer, but become blindsided when their house or business floods and the policy won't pay for it.

A Texas resident who did not have flood insurance had to take out a loan to fix his house. He has since purchased flood insurance, which covers up to $250,000 for damage to the residence and up to $100,000 for contents.

From September 2017 to May 2018, the number of federal flood policies increased 2% in Florida, 17% in Texas, and 77% in Puerto Rico. David Maurstad of the National Flood Insurance program stated, "We often see post-disaster increases in flood insurance policies in force, but unfortunately, it is not unusual to see some of these policies dropped when they come up for renewal. We have a long way to go to meet our goal of closing the insurance gap."

Even when you have insurance, don't count on being completely reimbursed for any damage to your property. Oftentimes the deductible is so high, people struggle to receive any benefits. In Houston, the disastrous flooding after Harvey left many homes damaged to the point of making them unlivable. Insurers saw 717,000 claims to homes, businesses, and vehicles. "About one-third were closed with no payment, indicating that the damage wasn't covered under the policy or the loss value was less than the deductible." After Hurricane Irma destroyed her roof, a Florida woman discovered buying a brand new roof was cheaper than paying her deductible.

Barry Gilway of Citizens Property Insurance Corp. said, "People had no idea that they had a hurricane deductible. There's still a lack of education in the industry regarding what is actually covered."

As hurricane seasons approaches, double check your insurance information. Be aware of your deductibles and how they work. If you don't have insurance, get it now! Also, remember flood insurance is a separate policy and in Houston, is likely worth the gamble.

https://www.wsj.com/articles/american-homeowners-still-have-a-big-underinsurance-problem-1531922482

https://www.fema.gov/national-flood-insurance-program

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