Updated damage estimates from Hurricane Helene show uninsured losses are in the tens of billions of dollars because many homeowners did not have flood insurance and are now faced with difficult financial burdens and decisions as they start to rebuild.
Only a third of those losses, however, will be covered by insurance. CoreLogic estimated the insured losses from Helene are between $10.5 billion and $17.5 billion, which includes coverage from private insurers and the National Flood Insurance Plan.
The insurance gap highlights the challenges homeowners now face in trying to rebuild after Helene as Hurricane Milton is bearing down on Florida and has the potential to cause more widespread damage.
“There are several reasons for the gaps, rising home values, increased costs to repair or rebuild, and many insureds have not maintained adequate insurance limits,” Elio Vecchiarelli, managing member of Blue Lion Insurance Advisors, told The Epoch Times by email.
Vecchiarelli referred to Superstorm Sandy (2012) and said it “seems to be the catalyst to rising costs in high-risk areas.”
“Many coastal properties have strong demand for consumers to reside. As a result, with the new construction and increased density along with higher home values, the total potential storm loss exposures have increased exponentially,” he said.
Extreme weather events occurring along coastal areas that have experienced a building boom are leading to more disaster losses.
“Americans are moving to places with a high risk of climate disasters, such as the Southeast and Southwest, despite extreme weather events increasing in frequency and intensity in recent years,” Loretta Worters, vice president of media relations for the Insurance Information Institute, said in an email to The Epoch Times.
According to Worters, there has been a tenfold increase in losses related to natural disasters that have occurred from the 1980s to the 2020s (in 2023 dollars).
“Disaster losses along coastal areas are likely to escalate in the coming years, in part because of significant increases in building and development,” said Worters. “We are seeing more frequent and more severe storms, as evidenced by Helene and now Milton. As such, insurers will have to reevaluate their rates in high-risk areas.”
While hurricanes and other natural disasters do affect homeowner insurance rates, there are other contributing factors such as inflation and the replacement cost to repair or rebuild houses. Homeowners’ insurance premiums have risen nationwide, not just in coastal areas.
“We’re still seeing rates rising across the country. Inflation has been a big issue,” said Worters. “P&C [property and casualty] replacement costs have increased nearly twice the rate of overall inflation over the last five years.”
Unfortunately, recent catastrophic storms could lead to even higher insurance premiums and could make certain areas unaffordable to some due to the cost of insurance.
“We can expect insurance premiums to continue to rise, especially with the severity of recent catastrophes. The flood maps and rate tables will keep adjusting to help spread the risk and costs accordingly so hopefully more can afford to continue to purchase,” said Vecchiarelli.
“Unfortunately, it may be unaffordable for many, while most can’t afford to self-insure. We have reached the point in time where you choose to live and build a future that may be driven by the cost of insurance.”
Texas’s rates have risen by 59.9 percent, followed by Colorado at 57.9 percent and Arizona at 52.9 percent.
According to Vecchiarelli, there have been too many insurance companies that have lost money as they paid out more in claims than they collected in premiums. In addition, inflation, increased material costs, and labor costs have driven higher replacement values, Vecchiarelli said.
“Therefore, premium increases are helping carriers update their risk to be more in line with exposures,” Vecchiarelli said, noting that some carriers have gone out of business and many others are exiting altogether and focusing on other lines of coverage.
There are, however, steps that homeowners and businesses can take to protect their assets and ensure there are no gaps in their coverage.
“Homeowners and business owners should have a proactive conversation on an annual basis with trusted professionals about potential catastrophes, potential losses, interruptions, and to confirm that they are current with trends and costs,” Vecchiarelli said, adding that those insured should consider maximum limits available.
“In addition to FEMA [Federal Emergency Management Agency], there may be private insurance carriers and excess limit options. For some uninsured and primary homeowners, it is possible they may be eligible for some benefits from FEMA. However, it is not guaranteed, and benefits historically have been inconsistent,” Vecchiarelli said.
