Hurricanes. Floods. Tornadoes. Huge storms battering our coasts and heartlands. You’ve seen the videos and read the stories. It’s increasingly hard to deny: Over the past few years, catastrophes have indeed been on the rise. And on average, they’re costing insurers more than ever.
The data backs this up. According to an Insurance Information Institute analysis, the year 2019 had 61 catastrophes accounting for $24.4B in insured losses; 2018 saw 55 accounting for $50.9B; 2017 encompassed 46 biggies with an astonishing $111B price tag; 2016 saw 43 at $23B; and 2015 had 39, a comparative bargain at $16B. (All amounts given in 2019 dollars.) Compare that to the time period between 1999 and 2005 — when the number of catastrophes never exceeded the 20s — and you can’t help but wonder what the heck is happening, and how insurers will weather this particular storm of storms.
Here at Covered, we don’t like sitting around fretting about potential natural disasters and their impact on the insurance industry. Nope! Instead, we like to get practical and tactical, helping our customers know what to do if one ever lands on their doorsteps. With that in mind, welcome to today’s blog: what to do if you have a hail or wind claim that’s the result of a catastrophic event.
Why hail and wind? Well, CAT claims are the umbrella under which hail and wind claims fall. And in homeowners insurance policies, hail and wind coverage often come with exclusions and nuances. (For example, did you know you probably have a separate, higher deductible for wind and hail?) So without further ado, let’s go over what catastrophic claims are, how they’re viewed by insurers, and what to do if you ever have to make a CAT claim for wind or hail damage.
CAT Claim Basics
What Exactly IS a CAT Claim?
“CAT” claims are shorthand insurance-industry speak for insurance claims resulting from catastrophic natural or man-made disasters. CAT claims may result from:
Severe weather, including hail storms; winter storms; and tornadoes, hurricanes, tropical storms, or other wind storms
Fires, including wildfires or arson
Civil disorder (e.g., rioting)
Disruption to utility services resulting from these types of catastrophic disasters
Currently, disasters are officially designated as “catastrophes” by the insurance industry when claims are expected to exceed $25M and a certain number of insurers and insured are impacted.
CAT claims result from the property damage caused by these catastrophic events. Indeed, that tornado or hurricane could cause serious wind or hail damage to your home and property. If you want your insurance provider to help you repair those damages, you’ll submit a CAT claim.
How Do Insurers View CAT Claims?
CAT claims are complicated for insurers. While they run models to estimate potential damages from catastrophic events, it’s hard to get right. Models often can’t predict the realities of these increasingly insane-seeming catastrophes. Think about Hurricane Harvey’s impact on Texas, Maria’s on Puerto Rico, or Katrina’s on New Orleans. Think about the 2018 wildfires that wiped out entire California communities, or the historic Colorado flooding of 2013. Insurers’ models failed to predict the incredible scope of damage for any of those catastrophic events.
If the models aren’t right, how can insurers gauge risks and exposures relative to premiums and coverage levels? To stay in business, they must charge rates relative to risk. It’s difficult. They want to be there for their customers, but they need to ensure their businesses remain solvent and able to pay claims.
What to do? Well, carriers may exclude certain hazards from homeowners policies in regions prone to catastrophic events. They’re likely to raise premiums in higher-risk areas. They may also cancel or choose not to renew policies in those higher-risk areas.
Why Are Some Insurers Pulling Out of Areas Prone to CAT Claims?
Indeed, some insurers are choosing to pull out of these higher-risk areas. Though the trend doesn’t sit well with many homeowners, it’s based on a purely rational decision on the part of insurers. Insurance providers are simply less likely to write policies in areas where homeowners’ losses are predicted to outweigh what they can recoup from their homeowners’ premiums. If the data clearly shows that insurers are going to lose money on a product, why would they continue to sell that product?
That’s pretty much what’s happening with California wildfire insurance. Homeowners in wildfire-prone areas are often finding their policies canceled, not renewed, or outlandishly expensive. And the data shows that some insurers underwriting these kinds of perils are either barely profitable, breaking even, or having years of profits wiped out after a single bad season.
CAT claims are also tremendously difficult for insurers to investigate and process, given that massive catastrophic events produce massive numbers of claims. Regardless of the circumstances, any claims process must adhere to strict deadlines and laws. So it’s often overwhelming for insurers. They have a hard time meeting demand, hiring independent, third-party adjusters to fill gaps.
What to Do When You’ve Got a CAT Claim for Hail or Wind?
Against this backdrop, the catastrophes will continue. Insurers and insureds alike will do their best to adapt. But we think it’d be awfully nice — BEFORE catastrophe hits — for homeowners like you to have a clear idea of what you should do when facing a CAT claim for wind or hail. So rest assured: By following the steps below, you’ll be well on your way to resolution.
Focus on Safety
When dealing with the aftermath of a catastrophe, focus first on taking care of yourself, your family, and anyone else involved. Is everyone safe from harm? Make safety your first priority. Don’t venture outside unless the storm has passed and it’s truly safe to do so. And stay far away from any downed power lines.
Prevent Further Damage
Take reasonable actions to protect your property from incurring further damage. Make any reasonable and necessary repairs that will help prevent further damage. A piece of plywood over a broken window or a tarp over exposed electrical work can make a huge difference. Again, however: Be smart and put safety first. Don’t be a hero. Only perform temporary repairs if it’s genuinely safe for you to do so.
Make sure to record any repair expenses, keeping all bills, receipts, and invoices. And do your best to keep any temporary repairs inexpensive. You may be reimbursed by your insurance carrier, and those expenses may count toward your deductible and policy limits.
Don’t Throw Anything Away
All that stuff that got ruined by the storm? While your instinct may be to throw it away immediately, don’t do it. Your insurance adjuster needs to be able to see the full scope of your damage.
Record the Details
Get those details down in writing ASAP. When you call your insurer, they’ll need to know the time and date the loss was incurred, the cause, and a detailed description of the damage.
Document the damage thoroughly. Use your smartphone to take photos or video. Keep your documentation efforts reasonable and safe. (In other words, please don’t fall off your roof while taking photos of that hail damage. You’ll find yourself dealing with a health insurance claim, too!)
Check Your Homeowners Policy
This should really be Step 0 — as in, when you buy your homeowners insurance policy, make sure you understand your hail and wind coverage. Are wind and hail included or excluded by your policy? What is your deductible.
At any rate, before you contact your insurance carrier, read over your homeowners policy sections relating to wind and hail. It’s best to have a baseline understanding of your coverage before calling about a claim.
Contact Your Insurer ASAP
Your homeowners policy will provide appropriate contact information for making a claim. Get in touch with them as soon as possible. The sooner you talk to them, the sooner they can help. Also, since we’re talking about a catastrophe that may have impacted hundreds or even thousands of people, be mindful of getting a good place in line. Do you really want to be among the last claims submitted?
In addition, be aware that certain claims are time-bound. For losses due to hail or windstorms, most insurers require that notice must occur no later than one year after the loss.
When talking to your insurance provider:
Be honest, candid, and thorough in describing your loss. Your insurer will NOT cover your claim if you’re found to have made false statements, engaged in fraudulent conduct, or intentionally concealed or misrepresented material facts or circumstances.
Ask questions to determine whether a claim should be submitted. Confirm with them: Is the damage you’re describing covered by your policy? Is coverage based on replacement value or actual cash value (ACV)? Is your claim likely to exceed your deductible? These are crucial questions, because it’s only worth submitting a claim if the damages significantly exceed your deductible. Remember, your claims history impacts your premiums and could cause your insurer to decide not to renew your policy.
Make sure you understand what’s required of you when submitting your claim. Ask them directly: How long do you have to submit your claim? How quickly can you expect to hear back from them? What guidelines must you adhere to when preparing and submitting your claim? Do they need you to get estimates from contractors?
Write down your claim reference number. When making any/all future communications, you’ll need to give your insurer this number. That way, they can quickly reference your claim details.
Cooperate Fully in the Claim Investigation
Your insurer is required to investigate all claims, so please don’t dream of being offended. And remember, following a catastrophe, their hands are likely overfull. So do your part to ensure a smooth, timely process.
Your insurer will let you know whether your claim can be handled via telephone, or whether — as is likely with a CAT claim — an in-person damage inspection is required. If it is, be ready to show them the damage.
Answer all their questions, and provide them with any requested records or information in a timely manner. Be aware that you’ll be expected to submit to an examination under oath. You’ll also be sent claim forms you’ll need to fill out in a timely manner.
As mentioned earlier, insurers often hire independent adjusters to help them meet the spikes in demand following catastrophic events. So if you’re visited by an inspector, politely inquire whether they’re an employee of your insurer, or an independent adjuster. If it turns out they’re an independent adjuster, ask for the name of the insurance company adjuster to whom they’ll send your inspection report.
Keep copies of all your documentation. Write down the names and contact information of anyone you talk with about your claim.
Don’t Begin Repairs Until Your Loss is Settled
You must wait until inspections are complete and your loss is settled before starting permanent repairs.
Some insurance carriers recommend contractors and repair personnel; others don’t. Either way, who you hire is entirely up to you. To avoid scammers, do your research and check references. Sadly, scams can be common following catastrophic disasters.
Seriously, Save All Your Receipts
Documentation is the name of the game when it comes to insurance reimbursements. So save (and copy!) all the paperwork produced by any contractors or repair personnel. You’ll need to provide all documentation to your insurer; they’ll explain proper methods for doing so.
If your hail or wind damage is bad enough that you need to live elsewhere while repairs are made, your homeowners insurance may cover “loss of use,” which reimburses you for temporary living expenses under certain circumstances. But, yep, they’ll need to see receipts for you to see reimbursement.
Want to know what’s happening with your reimbursements or any other aspect of your claim? Don’t wait and wonder. Just give them a call.
Still have questions about making your hail or wind CAT claim? Let us know! One of Covered’s expert insurance advisors will be happy to talk you through the process.