Although it is an unfortunate outcome for these homeowners, this scenario highlights the reason why the rates must the actuarially sound. The sticker shock led to cancelling the policy. Looks like the premium would have been a deal compared to the uncovered loss!
Nobody wants insurance until they need it. Even the increased premiums they are talking about are still subsidized by the federal taxpayer so they were definitely getting a favorable rate for the exposure. Unfortunately, many people don’t understand the basic concepts involved in insuring risk so they feel “ripped off” when they don’t “collect” something on their policy. What they fail to realize is that their annual premium “pays” them by providing protection against catastrophic loss. So these people saved a few bucks on their premium and now may have to build themselves new houses out-of-pocket. I wonder what their cost/benefit analysis looks like now.
Although it is an unfortunate outcome for these homeowners, this scenario highlights the reason why the rates must the actuarially sound. The sticker shock led to cancelling the policy. Looks like the premium would have been a deal compared to the uncovered loss!
Nobody wants insurance until they need it. Even the increased premiums they are talking about are still subsidized by the federal taxpayer so they were definitely getting a favorable rate for the exposure. Unfortunately, many people don’t understand the basic concepts involved in insuring risk so they feel “ripped off” when they don’t “collect” something on their policy. What they fail to realize is that their annual premium “pays” them by providing protection against catastrophic loss. So these people saved a few bucks on their premium and now may have to build themselves new houses out-of-pocket. I wonder what their cost/benefit analysis looks like now.
Uncle will probably show up and give them some “free” disaster funds, courtesy of you and me.