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Dr. Steven Weisbart, CLU, of the Insurance Information Institute talks about the necessity of consumers and businesses having insurance to protect themselves from disaster.

Eight out of 10 of the catastrophes with the greatest property damage in U.S. history have been hurricanes. Insurance coverage helped millions of Americans rebuild their homes, businesses and lives following hurricanes Katrina, Andrew, Wilma, Ike and many others. In 2005 alone, the insurance industry covered more than $57 billion in losses from just three hurricanes.
In recent years, increasing development along coastal areas of the Atlantic and Gulf states has put more homes at risk of severe wind damage. To continue providing broad coverage, while managing financial exposure, many insurers now issue policies with percentage deductibles instead of fixed-dollar deductibles.
In other words, in the event of a disaster claim, homeowners pay a percentage—generally between 1 and 5 percent—of their property’s value, with insurance covering the rest. Usually traditional fixed-dollar deductibles, such as $500 or $1,000, still apply to fire and theft damage.
Key Public Policy and Industry Issues
In most states, the competitive marketplace determines deductibles and premiums, though insurers’ plans are reviewed by state insurance departments. Key issues of concern to policymakers and the industry include:
  • Voluntary vs. Mandatory Deductibles—In some states, homeowners can choose whether or not they include hurricane and windstorm deductibles in their insurance policies. However, some insurers, state laws, and agency regulations require that insurance policies include hurricane and windstorm provisions.
  • Triggers for Coverage—Insurers, acting under the oversight of state insurance agencies, define trigger events under which hurricane or windstorm coverage is applied. Triggers include actions taken by the National Weather Service such as declaring a hurricane watch or defining a hurricane’s intensity. Triggers remain in effect for a set period of time—usually 24 to 72 hours—after a warning is cancelled or a hurricane is downgraded.
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