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Five Years Later, Katrina Changed the Face of Insurance

USAToday has an interesting story . . . today . . . by Sandra Block, “5 Years After Katrina, Homeowners Insurance Costs More.” What may shock you, is that the ramifications of the storm in terms of insurance premiums are being felt as far away as the coast of Maine.

Overall, the cost of homeowners insurance in coastal areas has risen 30% — more in some areas — in the last five years. As Block points out, when the next storm hits — and it will — homeowners will be bearing a much larger share of the cost of rebuilding than they might have in years past.

Put simply, Katrina will go down in our nation’s history as one of those defining events. It was not just a massive and impressive meteorological occurrence. The fallout from the political storm changed how disasters are handled in this country and ruined, or forever left a mark on, a series of political careers.

New Orleans has still not recovered, with blocks and blocks of the lower Ninth Ward standing empty, overgrown with weeds, the damaged houses still bearing the spray painted codes from the post-storm, house-by-house search for bodies.

But in an insurance sense, in a sense of how an entire industry perceives risk, Don Griffin, vice president of personal lines for the Property Casualty Insurers Association of America, quoted in the article, said it best. The storm made insurance companies decide “they couldn’t be all things to all people. Some of the very large companies looked at their whole coastline and realized even New York has a fairly significant exposure should a major event hit there.”

The overall article is interesting — maddening — saddening even as you consider how many people on the Gulf Coast are still trying to get satisfaction from the policies they held before the storm. The greater message, however, is that Katrina did not just devastate a region — and to some extent a presidential administration — it forever altered how homeowner’s insurance will be sold in the coastal areas of the United States and may well be a harbinger of future changes in relation to climate and climate change.

Anyone living in a flood plain or along the coast, in the wake of reading this article, needs to examine their homeowners policies — not just for price, but for coverage and benefits. It is highly likely that multiple policies will be required in these regions to grant anything close to the level of protection that would help a family recover from an event of the proportions of Hurricane Katrina. And yes, that means greater costs, but the question becomes, when do you want to pay the bill? Now or when your home and all your possessions are gone?

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