The Expert Podcast

So, no matter where you live in the country, there are very serious challenges coming from insurance coverages. Whether you live in California, Florida, Texas, even the Midwest, there are very serious and significant cancellations happening to insurance policies. Here's a couple examples. Here's where homeowners were stunned after losing insurance coverage. their insurance carrier gave them a letter saying they're dropping coverage. In California, there's a home insurance titanic because the state underpriced its risks. So, the companies are folding or stopping coverage. In Los Angeles, they're even suing insurance companies because they suddenly and simultaneously dropped coverage. And last but not least, homeowners are blindsided because not only did they have expensive insurance because the cost of rebuilding exceeded what their coverage was. And if you notice the theme in all of these, either you can't buy insurance, it costs too much, or it doesn't cover what it is you need to pay for. So what's the solution?

Well, as standard traditional what they call filed policies become harder to get or more expensive, more and more insureds are looking at a type of insurance called parametric insurance. Parametric insurance is a very simplified type of coverage that doesn't worry about things like how much damage you have underwriting the claim or adjusting the claim or getting estimates. It's paid simply on a trigger event. For example, if you bought parametric insurance for a hurricane, they would simply look to see was there a hurricane? And there might be limits like is it a category 2 or three? Is it within 50 miles of your house or not? Whatever. But let's say the coverage was for a category 3 within 50 miles of your house. All they do at the insurance company is look up was there a category 3 according to the national oceanic atmospheric administration and was it within 50 miles of your house according to the eyewall. If it triggered that event, you get paid. It's a flat amount. Doesn't matter how much damage there was. It doesn't even matter if there was no damage. You get paid. It's a trigger event.

Let's say you buy hail insurance. All they do is look to see was there hail bigger than this much at your location. If there was, they pay you flat amount. Doesn't matter if it damaged your house or not. These types of parametric insurance policies can help cover the difference between coverage that maybe isn't sufficient to rebuild or fix your loss. It may even be usable for somebody who goes bare and doesn't buy insurance because it's too expensive and you own your home for cash. It can be an offset. It can help you get relocation expenses. At least gives you some money. It probably won't completely rebuild your house, but it will be something that can offset some of the losses. Another type of parametric insurance could be fire. If there was a certain type of wildfire near your house or at your zip code, they would pay you. And it's very inexpensive compared to other types of insurance. It also has usually lower payouts, but it's a fixed payout.

Many people don't think they've ever heard of parametric insurance, but almost everybody already has one type of parametric insurance and that is life insurance. Life insurance is exactly that. It's a trigger event. Somebody died and it's a fixed amount, you know, a million dollars, whatever it is. And they don't try to adjust the amount based on the value of the person or how bad they died or, you know, how much they died. Like if you have a damage to your house, they're going to determine under a standard policy how much damage there is and how much does it cost to fix it. A parametric policy just pays you a fixed amount no matter what. Life insurance is the same thing. If somebody dies, you get paid a flat amount. So everybody's familiar with parametric insurance, even if you're not really connecting the dots.

So, you can use this same logic of getting a parametric insurance policy to either fill in gaps of coverage from a standard homeowners or commercial policy or even use it as a primary insurance. As long as you understand that you're taking on more risk than you would if you bought a standard filed policy from an admitted carrier, not through excess and surplus lines.

Thank you for watching another episode of Actual Human Advisory on Describe TV. Remember, we have live one-on-one consultation appointments available at actualhum.com where you can book a one-on-one undivided attention live call with a licensed investigator, a licensed insurance broker, a licensed mortgage broker, real estate broker. I'm also a certified real estate title examiner, a certified civil court mediator along with having developed and started over 15 businesses, several of which were sold for millions of dollars. So if you do have questions in any of those categories, you can arrange a one-on-one live video consultation. Use the link below and we'll see you on the next episode.