Proper Insurance in Catastrophic Areas

Recent increases in the number and severity of catastrophic insurance claims from floods, earthquakes, tornados, wildfires and hurricanes are having a negative impact on insurance and reinsurance company losses worldwide. As a result, insurance companies are taking major rate increases, limiting coverage and even reducing exposure by cancelling clients located in catastrophe-prone areas. And forecasts show no relief in sight from future catastrophes. Germany based Munich ReinsuranceCompany states: “The number and intensity of weather-related catastrophes is expected to increase in the coming decades largely on account of climate change. Munich Re therefore anticipates price increases in the loss-affected regions and business segments.” If you own a home located in an area subject to one or more of these events, you are going to need the assistance of an experienced and creative insurance broker/advisor who not only understands your unique needs but also has access to all the insurance markets and tools to properly insure your luxury assets. Many insurers now shy away from catastrophe-prone areas, but a handful of financially-sound blue-chip companies have special programs for qualifying accounts in high-risk locations. These luxury market carriers provide a level of service not available from standard market carriers. For example, these are not only the kind of insurance companies that inspect your home for damage after a hurricane, but they also make temporary repairs to mitigate the claim. In California several of these top carriers have even implemented programs to apply fire resistant foam to the exteriorof their clients’ residences to reduce the probability of damage from wildfire. Blue-chip luxury carriers have broad coverage terms and endorsements that can be modified to provide what is absolutely necessary without paying for what is not. For example, property insurance in catastrophe-prone areas can be quite expensive; however, in many instances you can reduce personal property and other structures so that your coverage matchesup with your actual exposure, thereby reducing your premium. You can further simplify the process by hiring a singlebroker/advisor to manage your entire insurance program, thereby providing you with one consolidated policy and billing statement as compared to having multiple agents and policies, each with separate billing and expiration dates.You need to be aware that standard insurance policies in high-risk are as often have exclusions and limitations that can cause serious gaps in your insurance portfolio. The National Flood Insurance Program provides a maximum of $250,000 in building and$100,000 in contents coverage. In most situations, this coverage limitation is insufficient to properly protect a luxury home in a flood- or storm surge-prone area. However, this gap in coverage can be properly addressed with a supplemental excess flood insurance policy. So it is especially important in high-risk areas for the sophisticated insurance consumer to have an advocate who is aware of the myriad of exposures and gaps in insurance coverage. To properly insure your home in a catastrophe-prone area and to receive the greatest number of solutions tailored to your needs, we recommend you select an insurance broker/advisor that  has direct relationships with carriers specializing in the market.

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