Saratoga News
Homes
The Real Deal
Disaster insurance provides protection
Hurricanes, tornadoes, severe storms, earthquakes and other natural disasters have caused billions of dollars in damages to homes throughout the country. Homeowners have often relied on insurance proceeds to repair or rebuild their homes or businesses. Recently, due to huge claims from these natural disasters, many insurance companies have stopped issuing new policies. Some companies have dropped customers in disaster-prone areas. These actions are making it more difficult for homeowners to obtain insurance coverage to protect their homes.
"Natural disasters like hurricanes and earthquakes destroy communities, not only with their forces of nature but also with the altered insurance landscape that results in their wake," said Lawrence Yun, National Association of Realtors senior economist. "When people in high-risk areas cannot obtain or retain homeowners insurance, which is necessary for a mortgage, it can slow redevelopment, depress the local housing market and prevent residents from buying and owning homes. As America's leading advocate for homeownership, NAR urges Congress to make natural disaster insurance affordable and available for homeowners and reduce the circumstances under which insurance companies cancel natural disaster policies."
Yun noted the insurance industry took an unprecedented hit in the 2004 and 2005 hurricane seasons. Eight of the nine most expensive natural disasters in United States history have occurred within the past four years, and 2005 will be the worst year ever for insured catastrophe losses in the U.S., at more than twice the costs of 2004.
The National Association of Realtors believes one way to deal with this problem is to establish a federal natural disaster policy that ensures access to affordable property insurance. Congress is considering several proposals toward this end. One plan would allow the federal government to provide natural disaster re-insurance to help states that have catastrophic insurance funds minimize their risk of loss. Another plan would allow insurance companies to create reserve funds with pre-tax dollars to pay out claims from future massive disasters. A third proposal would allow individuals to set up tax-free savings accounts that would be used to repair damages from disasters.
"Realtors work to build communities, and support legislation that will help people rebuild their homes and their lives," said Yun. "Just as federal terrorism insurance helped private insurers enter the market after 9-11, federal natural disaster insurance will help insurers provide homeowners insurance in disaster-prone areas and support the rebuilding of communities in those regions."
"Homeowners across this country need to know that no matter what comes over the horizon, their homes will be protected. Anything less is just a disaster waiting to happen," noted Jerry Giovaniello, senior vice president of government affairs for the national Realtor association.
Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.
