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NAR Talking Points ~ Natural Disaster Insurance
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Homeowners insurance is a necessity when securing a mortgage and buying or selling
a home. In high risk states, such as California and Florida, which are
particularly vulnerable to disasters like earthquakes and hurricanes, it
can be difficult for many new homeowners to find affordable insurance
policies. The cost of insurance is too high for credit worthy potential
home buyers to make the transition to homeownership. The NATIONAL ASSOCIATION OF REALTORS® has long urged Congress to enact legislation to establish a federal reinsurance program to help homeowners insure themselves from losses due to earthquakes, hurricanes and other natural disasters. H.R. 21, "The Homeowners' Insurance Availability Act," has been introduced in Congress this year to authorize the establishment of a federal reinsurance program for state disaster programs. Such a plan is needed to make sure homeowners are able to purchase natural disaster insurance at an affordable cost, and to reduce the circumstances in which insurance companies cancel the policies of homeowners in good standing because they are deemed too risky due to the possibility of a natural disaster. H.R. 21 protects against major catastrophes that reach beyond the scope of state programs. Although state disaster programs have helped keep homeowners' insurance available, neither state plans or the private industry have the capacity to cover risk posed by gigantic disasters that cut through numerous highly populated areas. The bill promotes fiscal responsibility by establishing a federal program that promotes insurance coverage for those at risk of property losses from a natural disaster. It correctly places the responsibility for shouldering the cost of disaster preparedness and response with those who are at risk. In an NAR survey released last year, respondents reported that an estimated 2,450 transactions fell through in 1997 due to difficulties in obtaining disaster insurance. Seventy-five percent of the respondents cited unaffordability as the reason insurance was not obtained. The problem of insufficient real estate protection is not isolated to just a few areas; rather, it affects much of the East Coast, as well as the West Coast, the Gulf Coast areas of the South, and several Midwest states in the vicinity of the New Madrid fault. The ultimate victim of the homeowners' insurance crisis is the consumer who is frustrated in his or her attempt to realize the American Dream of homeownership. Without insurance coverage, lenders will not issue mortgages, effectively shutting prospective buyers out of the market. Moreover, people who already own their own homes may decide the cost of insurance does not justify continuing to own. Or, they may gamble, go unprotected, and risk losing everything. Reproduced from www.realtor.org "For The Record": Spring/Summer 1999 - Talking Points for Association Executives |
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