For more than 50 years, Stan Virden had relied on the same insurance carrier to protect his homes, including his current three-bedroom home on Alabama’s Gulf Coast. Though he had never filed a claim, three years ago Virden’s insurer refused to renew the policy.
The 76-year-old retired naval officer scrambled to find an insurer willing to write a homeowner’s policy in a region at high risk for hurricanes and floods. He found one, but it’s no bargain. Virden is paying $6,000 a year for a policy with a deductible of $18,500 for hurricane damage.
“This is decimating my savings,” says Virden, who lives on a fixed income with his wife, Beth, 64.
He can thank Hurricane Katrina for his insurance woes. After America’s costliest hurricane devastated much of New Orleans and parts of neighboring states in 2005, insurers paid out more than $40 billion and national companies retreated from the region.
Five years later, policies are slowly becoming more available for the millions of Americans living along the Atlantic and Gulf Coast, but the costs are astronomical.
Since Katrina, the average insurance rate has jumped 25 percent statewide and a whopping 100 percent in and around New Orleans, according to Louisiana Insurance Commissioner James J. Donelon.
Besides paying higher premiums, homeowners are finding they must pay more out of their pockets before coverage kicks in.
In the Gulf Coast states of Alabama, Mississippi, Louisiana, Texas and Florida, as well as 13 other states and D.C., policies are allowed to include a hurricane deductible as high as 5 percent of the property’s value, or $12,500 on a $250,000 home. What’s more, some insurers won’t even offer coverage for damage from high winds, storm surges or flooding.
Gambling on no coverage
As a result, a growing number of coastal property owners who have paid off their mortgages, and therefore aren’t required by a lender to carry insurance, are rolling the dice and going without coverage.
In two coastal counties in Alabama, researchers found that up to 50 percent of homeowners without a mortgage have dropped expensive coverage for wind damage. John Wells, a spokesman for the Mississippi insurance commissioner, says more older people in his state are doing the same.
“Insurance seems indispensable when you are in a crisis,” says Bob Hunter, director of insurance for the Consumer Federation of America, but “people will take a chance when they feel they have no options.”
With private companies bowing out, government is stepping in.