Authored by: Alok Jha, CEO of Assured Risk Cover
To leave or to stay? That’s the penetrating question families often face as a hurricane roars ever closer. The decision is based on a number of variables, including:
- “Is an evacuation order in place?”
- “Will we be safe in the house?”
- “Is there enough food and water to last a week to 10 days?”
- “Is there backup power?”
- “If we evacuate do we have money to pay for gas, food and lodging?”
Human behavior is a funny thing, because even after carefully considering all of these variables, one’s decision often hinges not on hard data, but on one’s gut. Going with the rest of the crowd is often the default. (“What are Pete and Marge going to do?”) Peer pressure is a powerful force in a crisis (though not as powerful as 110 mph winds).
The New York Times recently reported on the experiences of individuals who evacuated during Hurricane Michael, and a common theme was the cost of evacuation.[1]
Sierra Cardenas of Panama City Beach said hers was a life or death decision. “I have a 2-year-old daughter and I could not take a chance with our lives.” Cardenas expected to be away from home for a prolonged period, and at the time she was interviewed her gas, food and motel bills were already nearing $500, which she put on a credit card.
Kelly Gerig of Panama City had spent nearly $800. Vanessa Feigel had spent $500 for food, lodging and gas – which was coming out of the family’s savings. Even though the military paid Jody Walton’s evacuation expenses, she wasn’t sure how she could afford her Homeowner’s deductible.
Most Homeowners policies don’t cover evacuation expenses so residents have to dig deep into their pockets or put everything on a credit card. In a survey conducted this summer by National Hurricane Survival Initiative and FAIR Foundation, nearly one-fourth (23%) said at one time or another in their life they’ve stayed put during a hurricane because of the cost of evacuation.
One-fifth of the survey respondents said they paid between $300 and $500 to evacuate from Hurricane Irma, while 40% spent $500 or more.
The first few days (and weeks) after a hurricane can be paralyzing. While it’s difficult to be prepared physically and emotionally to face what may come, it’s now easier than ever to be prepared financially for those first 24 to 72 hours. A new type of insurance called StormPeace pays immediately after a hurricane and the funds can be used for expenses not covered by a Homeowners policy as well as the deductible.
In fact, some Florida residents who can’t afford Homeowners insurance have relied on StormPeace and its low premiums to get back of their feet; $1.25 a day can buy up to $10,000 worth of coverage. StormPeace is parametric insurance, which means the payout is based on preset parameters: the strength of the hurricane and its distance from the insured’s address. There’s no claims process and unlike traditional insurance all claims from Michael have been settled, most of them within 24 hours.
Reacting to the Times article one reader wrote, “This is a sobering reminder of how many people in this country are just a few hundred dollars away from real financial hardship.”
Parametric insurance like StormPeace is a product that’s long overdue. It helps people get back on their feet faster without having to exhaust their savings or max out a credit card. So the next time evacuation orders are posted the decision to stay or go will be easy.
[1] https://www.nytimes.com/2018/10/13/reader-center/evacuation-hurricane-michael.html
