Are Your Clients Prepared for a Major Disaster?

Many homeowners lack adequate insurance coverage, do not fully understand their homeowners policies and do not have enough savings to support their households in the event of a disaster, according to a new national consumer survey commissioned by Trusted Choice® and the Big “I.”

The survey reports that of the respondents:

  • At least 73% don’t have a flood insurance policy separate from their homeowners coverage.
  • At least 28% do not have enough savings to support their households for even one month after a disaster if forced to leave their home, and only one-third could support their household for more than three months.
  • Less than one-third store an up-to-date and complete home inventory away from their premises.
  • More than 40% don’t have or don’t know if they have coverage that will fully replace their belongings and home in the event of a disaster.

“Most people think a basic homeowners policy will cover them in the event of a disaster,” says Bob Rusbuldt, Trusted Choice president and Big “I” president & CEO. “However, these new findings highlight that a startling number of homeowners have not taken some of the most basic steps to adequately prepare for a disaster such as a hurricane, flood or fire.”

Almost three-quarters of respondents lack proper flood insurance coverage—leaving themselves vulnerable to damage caused by rising water or flooding, including common problems such as seepage of underground water into a home, leaky roofs and toppled trees from saturated soil. According to FEMA, floods are the leading disaster in the U.S., and people outside high-risk flood areas file more than one-fifth of all NFIP claims.

“With flooding being so pervasive and hurricane season in full swing, it is very troubling that this large majority of homeowners is risking everything,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “A little planning and knowledge can go a long way.”

Of those surveyed, 56% have just enough savings to support their households for three months or less if forced to temporarily move away after a disaster damages their property; 28% couldn’t sustain for even a month; and 14% say their savings would last less than a week. For off-premises living expenses in these cases, a standard homeowners policy provides only limited protection—usually 10% of the coverage on your home—and a flood policy provides no coverage.

The survey also reveals a lack of basic understanding regarding standard homeowners insurance coverage: More than one-fifth of survey respondents don’t know whether they have replacement cost coverage for their belongings and home—which allows them to replace lost possessions with new items—or if they have actual cash value coverage, which takes depreciation of the structure and personal items into consideration. In most standard homeowners policies, actual cash value is the default coverage.

“The risk of financial ruin in the event of a major disaster is significantly higher for those homeowners who have only actual cash value coverage because they cannot fully recoup their losses,” Flannagan explains. “Trusted Choice recommends homeowners purchase replacement cost coverage and take a hard look at their finances to ensure they are prepared.”

Margarita Tapia is Big “I” director of public affairs. Sue Nester is Big "I" broadcast director.