ACE USA, the U.S.-based retail operating division of the ACE Group of Companies, reports that the increase in extreme weather events has long-term financial implications for consumers and their communities, according to the company’s newly released white paper titled “Extreme Weather: Events, Trends & Consumer Impact.”
The white paper reports that Hurricane Katrina broke all records, with estimated total property losses of $135 billion while other weather events caused damage and losses impacting millions of consumers.
Los Angeles experienced catastrophic losses in 2005 with severe rainfall, triggering flash floods and landslides that killed 10 people, damaged and destroyed homes, and accounted for $300 million in property damage. With persistent drought affecting wide areas of the Southwest and Southern Plains, wildfires burned 8.53 million acres in 2005, breaking the record set in 2000. That year, the devastating Cerro Grande Fire in Los Alamos, N.M., resulted in insured losses of $140 million.
According to Kimberle Kennedy, vice president, ACE Accident & Health, and author of the white paper, homeowners, even those living in high-risk areas, seldom expect to be driven from their homes by natural disasters like tornadoes, wildfires, or hurricanes. Adding to their vulnerability, some homeowners assume that their basic homeowners insurance policy will provide them with adequate financial protection if their homes are damaged or destroyed. As unexpected expenses are incurred, homeowners must still meet their mortgage obligations, even if their homes have been severely damaged or completely destroyed.
According to weather experts, it’s likely that extreme weather events will continue to escalate in number and severity. With the 2006 hurricane season upon us, tropical storm experts predict 17 named storms, and nine hurricanes, and scientists predict that the Atlantic Basin, where hurricanes form, is likely to remain very active for at least the next decade.
After enduring a record-setting 1,819 twisters in 2004, “Tornado Alley,” the most tornado prone region of the U.S., experienced “only” 975 tornadoes in 2005, a welcome, if short-lived respite. Already this year, in March, the first month of tornado season, 226 twisters touched down, the greatest number reported for that month in more than 50 years.
The white paper examines consumer issues associated with extreme weather events, including supplementary insurance products designed to protect the financial health of homeowners faced with the task of recovering from hurricanes, floods, fires or any other disaster that renders the home uninhabitable. According to Kennedy, homeowners can avoid financial disaster by purchasing affordable “mortgage disaster protection” insurance, designed to:
* Cover monthly mortgage payments, including taxes, insurance and other escrow items (when the home is deemed temporarily uninhabitable)
* Reimburse the homeowner’s deductible for losses covered under the mortgage disaster protection insurance policy
* Provide a monthly emergency cash benefit
* Cover the remaining mortgage balance (when the home is deemed permanently uninhabitable)
“Recovering from a hurricane or any other disaster can be emotionally devastating and extremely costly. Many homeowners may not have the financial resources needed to fully recover. Coping with additional expenses such as building contractor advance payment, lost wages and replacement of necessary personal and household items, while continuing to make monthly mortgage payments can be extremely difficult for some homeowners,” Kennedy added. “To protect their personal financial strength in the event the worse happens, consumers are wise to complete a regular review of their insurance needs, existing policies and coverage, as well as supplemental products available in the market.”
Source: ACE USA
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