Top Catastrophic Insurance Claims Explained


Disaster won't wait. Whether it's flooding, wildfires, or hurricanes, homeowners need to protect their families and their homes from devastation. One integral part of any home preparation plan is homeowners insurance, which helps you get back on your feet after a catastrophic event.

In honor of National Preparedness Month, we welcomed Jeff Arnold of RightSure Agency Group and Michelle O'Connor of O'Connor Insurance Associates, Inc. to discuss what you need to know about homeowners insurance and catastrophic claims. 

What is a "CAT" claim?

A catastrophic claim on your homeowners insurance – or a "CAT claim" – stems from a "natural and man-made disaster that is unusually severe," according to the Insurance Information Institute.

Weather events that qualify as CAT claims include tornadoes, hurricanes and tropical storms, other wind/hail/flood incidents, and winter storms. A standard homeowners insurance policy generally covers property damage and the loss of personal property from fire (including wildfires), hail, and windstorms. However, earthquakes and at times, hurricane damage, may require additional coverage. 

Hailstorms generally are covered under standard homeowners policies.

It can be difficult, especially for new homeowners, to know which coverage they have and which coverage they need. If you're ever in any doubt, we recommend you reach out to your insurance agent to find out.

If you're looking for a quick overview of the different CAT claims and the best ways to prevent having to file a claim, then read on! 

Earthquake – To endorse or not to endorse? 

Earthquakes can cause incredible damage.

If there's a whole lot of shaking going on, you'll need to add an endorsement to your policy or even take out a separate earthquake policy.

"You have to add that on, endorse it onto a home insurance policy," says Jeff, whose coverage area includes California and homes along the San Andreas Fault Line. "Not every carrier will add an earthquake as an endorsement. For some, it's a separate policy."

If you're thinking, "Do I need earthquake coverage?" you may wish to speak to an insurance agent about adding coverage that covers earthquakes (and completing earthquake preparedness). After all, California isn't the only place that shakes, rattles, and rolls. 

Are you covered?

"We actually had an earthquake on August 9th in North Carolina," recounts Michelle. "It was above five on the Richter scale. We've not really had that as a threat to our area, so it's definitely something we're having conversations with our clients about now."

Homeowners that were in the immediate area suffered foundation damage.

"It's expensive and makes the home unlivable until it's repaired," says Michelle. 

"Earthquake coverage can be a financial lifesaver."

For California homeowners, earthquake coverage is more pertinent.

"Only you can decide if you need and can afford an earthquake insurance policy," says Jeff. "While earthquake insurance is absolutely an expensive coverage, an earthquake policy can be a financial lifesaver and well worth the cost."

Keeping your house cool and safe in extreme heat 

Intense heat can damage a home's systems.

In Arizona, Jeff and his policyholders feel the heat – literally. In the desert Southwest, Jeff recently endured temperatures of 118 for three days in a row.

"The number one thing is a lot of times equipment breaks down," says Jeff. "Air conditioners stop working. Our water heaters get overheated because in some places they're exposed to the elements."

This coverage would also require an endorsement added to the homeowner's policy in Southwest, though in North Carolina, it's still part of the policy. 

HVAC units can break down under extreme weather conditions.

"We have heat and a lot of humidity," says Michelle. "Certainly, air conditioning units break down, but most of our carriers aren't offering that endorsement yet."

Homeowners may also want to take proactive measures, such placing their HVAC systems in the shade and preparing for a power outage, before extreme heat arrives.

The most frequent natural disaster 

Along with most natural disasters comes flooding.

According to the National Flood Insurance Program (NFIP), 90 percent of all U.S. natural disasters involve flooding. Flood damage is not covered by a standard policy and requires purchasing separate flood insurance coverage, many times supplied by the NFIP. It can be a prerequisite to getting a mortgage if you're buying a home in a designated flood zone.

"If you live by a body of water, typically, homeowners flood insurance is going to be required," says Michelle. "There's flood plains that have been established that allow the mortgage companies to know that your home's at a higher risk."

Flooding can occur outside of designated flood zones.

Even if you don't need or have a mortgage, some homeowners should consider purchasing flood insurance. If you live in a flood plain or in a place that sees unusually high rainfall totals, contact your insurance agent to discuss your flood insurance options.

"This is a hot topic in North Carolina," says Michelle. "We've had torrential rains in recent years, and the lack of flood policies in the middle of the state and some mountainous areas as well – homes can still flood in an hour or two."

Understand what "flooding" is and how it relates to your homeowners insurance.

But how do you know you should buy flood insurance?

Most homeowners have "sewer and drain" coverage in their homeowners policy. This addresses items that overflow in your home, like a toilet or a sink, though a homeowner still may need an endorsement for sewer or water backup into the house. However, neither of those situations are what insurance carriers consider "flooding."

"I always simplify the flood definition as rising or standing water," says Michelle.

"Moving pools of water," adds Jeff, "When you think of it in terms of a flood, it's moving because rains come down, a large water's moving down the street, or moving through your yard – that's going to be subject to flood insurance."

Rocking like a hurricane 

Intense storms can create wind and hail damage.

Many standard homeowner policies cover damage from hailstorms and windstorms, which would include damage from hurricanes. However, if you live in an area that sees hurricane damage frequently, you may need additional coverage.

"We live in an interesting place where there's a hurricane that threatens us just about every other week," laughs Michelle. "On the coastal areas of both North Carolina and South Carolina, you have to add on wind and hail to your policy, and typically, it does have a separate deductible. It's the bulk of the policy cost to add those coverages on."

Some coastal areas need additional hailstorm and windstorm coverage.

The home's proximity to the coast determines how much a homeowner needs to pay for the extra coverage, which is desperately needed in high-risk areas.

"It's the risk factor," says Michelle. "The things that are not as likely to happen, the insurance companies are going to be willing to cover at no additional cost."

Before a hurricane hits, make sure to prepare your family and your home with these quick tips

How to keep your claims all "CAT"

Use home insurance responsibly.

Some homeowners are confused between homeowners insurance, a home warranty, or out-of-pocket expenses. And just where does the deductible come into play?

"Typically, we try to counsel homeowners to think of their insurance policy as large losses only," says Jeff. "Don't think of your homeowners as a maintenance policy. You're only going to make yourself uninsurable in the future if you keep filing these very small claims or treat it like a warranty."

Complete minor home repairs.

Home warranties help keep your maintenance costs manageable with a monthly cost and a service fee, while homeowners insurance should only be used for incidents that cost more than your deductible amount.

"If you think about the home policy as being for catastrophic things, the other issues are things that should be taken care of on a regular basis," says Michelle. "That includes being able to budget for those items, and scheduling those items, which the vipHomeLink app does a beautiful job of reminding homeowners."

Give your insurance agent a call.

To keep your number of claims low, increase your deductible. This can also help you to save money on insurance costs.

"Reduce the premium by increasing deductible," says Jeff. "This means you're on the hook for these smaller items, which is good."

If you have any concerns or are unsure about your policy or deductible, reach out to your insurance agency. They want to hear from you.

​"The one thing I want to tell policyholders is not to be afraid to call us," says Michelle. "There's lots of things that happen that if our policyholders would just give us a call first, we could talk them through and provide advice."

This includes putting on an addition to their home or even hiring a nanny.

"We can talk about all your options," says Michelle. "We may think of something that you hadn't that can change the course of your decision." (See a snippet above from a previous episode of the vipHome Podcast where Michelle discusses contractors and insurance.)

Likewise, Jeff warns, "Buyer beware," especially when buying policies online. Instead, homeowners should use the expertise of an insurance agent.

"Find an independent agent near you or online, then get that advice and counsel," says Jeff. "It's not any more expensive, and these people are passionate about what they do."

And finally – stay on top of home maintenance

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By understanding home insurance, home warranties, and home maintenance – you can save money and time, and gain peace of mind. That's why the vipHomeLink home management app sends you maintenance reminders, so you don't have to suffer a non-CAT claim. We help you know what to do and when to do it, and connect you with experts in the industry whose expertise you can trust.

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Meet our panelists 

Jeff Arnold has been in the insurance agency for more than 30 years and is president of RightSure Insurance Group. Though based in Tucson, Arizona, RightSure does business in 42 states and provides personal, business, life, and health insurance. The company boasts integrating technology in every aspect of the business.

Michelle O'Connor has more than 25 years of experience in the insurance industry and has owned an agency for more than two decades with her husband. O'Connor Insurance Associates Inc. in Charlotte, North Carolina, specializes in personal, business, life, and disability insurance, which they provide to more than 1,500 clients.

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