The many aspects of hurricane risk
A little over a week ago, the not-yet-even-named hurricane Alex blew through the southern Atlantic coast of Florida, storm surges and rain bursts flooding the streets of Miami in knee-deep water, stranding cars, motorists, pedestrians, air flights, and interrupting businesses.
Alex then raced east to Bermuda, the international finance jurisdiction for global leaders in the re/insurance industry and related financial intermediation. Fortuitously, Bermuda had just launched (and concluded) another innovative insurance industry milestone, the first Bermuda Climate Risk Summit 2022.
According to Steve Weinstein, chairman of the Bermuda Business Development Agency, Bermuda has been storm-ready since 1609, when the island was first settled.
We islanders prepare for every hurricane as if it was a Category 5 eye wall passing directly over the island and as most recently, on September 14, 2020, Bermuda was captured by the Nasa-NOAA hurricane satellite directly in Hurricane Paulette’s eye.
Mr Weinstein also shared media footage of Bermuda’s Hamilton harbour seemingly Alex-serene with the US Fox Weather News desk, showcasing Bermuda’s resilient construction and culture of preparedness that make tropical storms a non-event.
As per usual, Bermuda was open for business the next day, June 7.
We Bermuda islanders can be justifiably proud of our reputation for hurricane readiness and resilience; however, homeowners should still run through an annual risk insurance contingency checklist.
And, it probably won’t surprise you, dear readers, to know that clients (in my past professional practice) when asked about what’s in their home and other insurance coverage, the responses were often a little vague.
In the meantime, renovations, additions, deletions, acquisitions, a home business, and inflation may have occurred – changing the terms of, and possibly non-compliance with the coverage.
Changes and factors below are general in nature and may, or may not, be applicable to your property:
• Age of home and kind of construction: stone, cement block, wood, etc.
• Square footage increased through additions/renovations
• Tenant rental added
• Total replacement cost increasing from original estimates due to inflation, etc
• Home maintained to code
• Number of inhabitants in your home
• Increased crime issues in area, home safety and security areas tightened
• Geographical area possibly subject to unstable embankment, poor drainage, land erosion, etc
• Low-lying sea exposure areas, becoming more important due to climate change
• General condition of plumbing, electrical, heating systems
• Recurring mould/damp issues
• Termite, pest vigilant protection
• Home business may be subject to increased liability exposure
• Number, cost, and type of prior claims made to insurer
• Homeowner credit history rating
• Pet ownerships, kind, number
• Bundling of homeowner’s various insurance policies
• Insurance adequate to cover rebuild (at today’s prices), replace personal belongings within, and liability protection in case of someone is injured on your property, for example in a swimming pool/hot tub facility etc.
• Boat ownership. Understand this policy coverage (it may be separate)
Reminder readiness also:
Paper is still good in no-energy/internet access emergencies: cash and cheques are legal tender when smartphone/credit card pay is down.
All original personal, financial documents: deeds, birth certificates, passports, credit cards, banks, investment accounts, insurance policies, car/boat, etc, registrations, family photographs, and vitally, passwords, addresses, phone and e-mail access backed up, digitalised on a computer and separately, the cloud.
Store paper duplicates in waterproof, easily transportable containers ready to be relocated with you on a moment’s notice!
Let’s face it, insurance premiums are reluctant costs, unlike a new adornment or an electronic device, and can take a chunk out of your budget.
One recurring individual complaint woefully states: “I’ve paid these premiums every year and never had a claim. I could have saved a bundle by self-funding all these years!”
Yes, but would you have?
Let’s say your premium is $6,000 a year, or higher, say $10,000. In ten years, that’s $60,00 to $100,000 contingency fund savings in a very liquid, very, very low risk account
Then, your house takes a major hit from the next nasty hurricane. Replacement costs total $500,000 or more.
A $400,000 difference! Where will it come from? Depleting your retirement fund? What then? Possibly increased borrowing with another loan?
What about the stress of managing the finances, the rebuilding, the possible injuries, the relocation, the work time lost?
Some may be able to work through this self-funding situation, but for the rest of us – it becomes a very, very difficult proposition indeed.
Dear readers, we buy insurance for when we don’t need it, because no one can predict the future.
In the meantime, we need the peace of mind knowing that we have done our best to protect our families and our homes.
• Martha Harris Myron is a native Bermudian journalist and author of Bermuda’s First Financial Literacy Primer: The Dawn of New Beginnings – A Back-2-Basics Financial Review to Dramatically Improve Your Lifestyle. All writing net proceeds to Bermuda registered charities