As a hurricane approaches, protecting your home becomes a priority.
Hurricane Laura continues to strengthen to a Category 5 storm as it barrels toward Texas and Louisiana. Potentially devastating winds and storm surge threaten 1.1 million homes with over $265 billion in reconstruction cost value, reports CoreLogic, a global property data and analytics provider.
With top winds of 150 mph, Laura is a high-end Category 4 hurricane, only 7 mph below a Category 5, making it the first major hurricane of the 2020 Atlantic season.
The Gulf Coast is bracing for the impact. Hundreds of thousands of people have been forced to evacuate areas across Texas and Louisiana. According to the Federal Emergency Management Agency, COVID-19 testing sites in Louisiana will be inoperable until the storm passes. The storm’s track has adjusted slightly away from the Houston metropolitan area.
It’s expected that the energy industry will also see some disruption as the Gulf Coast is home to oil rigs. Several refineries across the area have shut down, and with the increased demand for fuel from evacuees, there is potential for localized fuel disruptions.
Catastrophe and weather experts at CoreLogic expect the 2020 hurricane season to continue on its above-average trend given warmer oceanic temperatures, which presents financial risk to homeowners and businesses in property services, such as insurers and mortgage lenders.
Hurricane-driven storm surge can cause significant property damage.
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Hurricane-driven storm surge can cause significant property damage when high winds and low pressure cause water to amass inside the storm, releasing a powerful rush over land when the hurricane moves on shore.
In 2005, Hurricane Katrina’s storm surge breached 53 levees, causing catastrophic damage to New Orleans and its residents. It is now one of the costliest hurricanes on record, generating $125 billion worth of damage.
A combination of several climate factors is driving the strong likelihood for above-normal activity in the Atlantic this year, according to forecasters with the National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center, a division of the National Weather Service.
El Nino-Southern Oscillation conditions are expected to either remain neutral or to trend toward La Nina, meaning there will not be an El Nino present to suppress hurricane activity. Also, warmer-than-average sea surface temperatures in the tropical Atlantic Ocean and Caribbean Sea, coupled with reduced vertical wind shear, weaker tropical Atlantic trade winds, and an enhanced West African monsoon increase the likelihood for an above-normal Atlantic hurricane season. Similar conditions have been producing more active seasons since the current high-activity era began in 1995.
“NOAA’s analysis of current and seasonal atmospheric conditions reveals a recipe for an active Atlantic hurricane season this year,” said Neil Jacobs, acting NOAA administrator.
The NOAA outlook predicts a 60% chance of an above-normal season, a 30% chance of a near-normal season and only a 10% chance of a below-normal season. The Atlantic hurricane season runs from June 1 through November 30.
“The coincidence of two catastrophes—a damaging hurricane season and the ongoing global pandemic—underscores the importance of the correct valuation of reconstruction cost, one of the core tenets of property insurance,” said Tom Larsen, principal of insurance solutions at CoreLogic.
He added, “Homeowners, mortgage lenders and insurers need to work together to ensure properties are fully protected and insured. CoreLogic data has found a correlation in mortgage delinquencies and catastrophes, which could point to a serious issue of underinsurance trends.”
A new survey conducted by ValuePenguin, a personal finance website, revealed that although many homeowners feel prepared for hurricane season, their actions tell another story. While 86% of homeowners in high-risk states say they feel prepared for this year’s hurricane season, one-third have not taken any steps to prepare against storm damage.
Forty-five percent of homeowners in hurricane-prone states have no idea how much hurricane-related insurance coverage they need to be fully protected, and many severely underestimate the costs of a hurricane- or flood-related repairs.
While many homeowners in high-risk areas believe they will face flooding from hurricanes this year, just over a third falsely believe they are covered under their homeowner’s insurance policy. Similarly, 29% of renters in such areas also believe their renters insurance policy protects them from flooding.
Nearly half of all Americans said the coronavirus pandemic has introduced new worries this hurricane season, especially covering the cost of repairs amid lost income, how potential damage would impact their stay-at-home situation, and maintaining social distance at a hurricane shelter.
Of the people who have already experienced a hurricane this year, 73% have had wages affected by COVID-19, either through layoffs, furloughs or reduced pay.
To confirm adequate coverage, insurers must biannually consider cost of materials and labor, as well as demand surge, to completely rebuild a home, while homeowners must communicate frequently with their insurance agents to relay home improvement activities.
The 2020 CoreLogic Storm Surge Report provides an evaluation of the number of homes in the United States that are vulnerable to storm surge, particularly the properties that line the coastlines from Texas up to Maine.