Many homeowners have limits on their home insurance policies that are too low to cover the full cost of repairing or rebuilding in case of a natural disaster—and the problem is particularly alarming in areas at risk of hurricanes and flooding, The Wall Street Journal reports.
Catastrophic damage left in the wake of Hurricanes Harvey, Irma, and Maria last year revealed a widespread lack of full insurance coverage for many homeowners in Texas, Florida, Puerto Rico, and elsewhere, according to the Journal. The problem is that while many homeowners may have home insurance, their policies are too low or they don’t have flood coverage, which generally must be purchased under a separate policy. “Many people thought that they had a fully insured home or fully insured business” before last year’s storms, says Iraelia Pernas, executive director of Acodese, an industry group for insurers in Puerto Rico. “They discovered that there were some exclusions in their policies.”
In Houston, which was ravaged by Hurricane Harvey last September, about 70 percent of flood-related damage was not covered by insurance, according to real estate data firm CoreLogic. Of the 717,000 claims insurers received from Harvey victims by Oct. 31, 2017, about a third were closed with no payment made. Similarly, in Florida, where Hurricane Irma hit, insurers received nearly 1 million claims and did not pay out a third of them.
Too often, homeowners don’t realize they need to increase their policy limits if they expand or upgrade their homes, insurance regulators told the Journal. Also, homeowners may learn that their policy limits are insufficient for rebuilding, as the cost of construction materials and labor continues to rise.