January 2021 – Parachute – Risk Protection Technologies

The 2020 Atlantic hurricane season was extremely active and broke many records:

30 named tropical storms – more than ever recorded and exceeding the alphabetical list of 21 Atlantic storm names.
12 tropical storms hit the U.S., of which 5 came ashore in Louisiana – 3 more than the previous record from 1916.

Tropical cyclones impacted the entire U.S. coastline from Texas to New Jersey last year but hit particularly hard the Caribbean and Central America. In this blog, we are taking a look back at the major hurricanes making U.S. landfall and what damages they caused before we share our perspective on how you can prepare for 2021.

The Storms

The 2020 Atlantic hurricane season produced 30 named tropical storms of which 12 made landfall in the U.S. The season got off to an unusual early start with tropical storm Arthur in mid-May, two weeks before the official start of hurricane season on June 1^st. By July, three tropical storms, Edouard, Fay, and Gonzalo, broke the record for earliest fifth, sixth, and seventh named storms, respectively. Many more hurricanes and tropical storms formed over the summer. In the month of September, 10 tropical storms formed, more than in any month on record. By the end of October, hurricane Zeta became the 27^th named storm of the season, the most since 2005, and the 11^th storm to make landfall in the U.S. Eta was the last tropical storm impacting the US in 2020. It made landfall twice in Florida on November 8 and 12 after having steamrolled as major hurricane into Central America.

Tropical cyclones with maximum sustained winds of 39 mph or higher are called tropical storms (and receive a “name” from the National Hurricane Center). Storms with maximum sustained winds of 74 mph or higher are called hurricanes. They are categorized from 1 to 5 on the Saffir-Simpson Hurricane Wind Scale. The higher the wind speed, the higher the category, and the greater the hurricane’s potential for property damage.

Here is an overview of the most notable hurricanes (from a U.S. perspective):

Hurricane Hanna: Category 1 Hurricane Hanna, the earliest 8^th named storm on record, made landfall at Padre Island, Texas on July 25. High winds and heavy rainfall, up to 12 inches, caused widespread flooding in the Rio Grande Valley.

Hurricane Isaias: Tropical storm Isaias brought high winds and heavy rain to Puerto Rico on July 29-30 before traveling north passing by the coast of Florida, Georgia and South Carolina. It intensified over the Atlantic and made landfall as a Category 1 hurricane near Ocean Isle Beach, North Carolina on August 3. High winds and heavy rains were experienced much further inland than normal reaching from Virginia all the way to New England. Millions of people lost power and 5 people died as a result of the hurricane.

Hurricane Laura: On August 27, Hurricane Laura made landfall near Cameron, Louisiana as a Category 4 hurricane with sustained winds of 150 mph before downgrading to a Category 2. It tore off roofs while knocking out power to hundreds of thousands of people. A large storm surge occurred over much of Louisiana’s coastline and flooding rainfall extended into western and central Louisiana. Over 500,000 residents were evacuated. 98% of households in Cameron County lost power. At least 27 people were killed. The total economic losses are estimated at $16 billion.

Hurricane Sally: Hurricane Sally made landfall near Gulf Shores, Alabama, as a Category 2 hurricane on September 16. Flooding along the Alabama-Florida border forced thousands of rescues. In Florida alone, Sally dumped four months of rain in four hours causing widespread flooding. Due to high winds and flooding, hurricane Sally left many communities heavily damaged in its wake.

Hurricane Delta: On October 6, Hurricane Delta rapidly intensified from a tropical storm into a Category 4 hurricane over the Caribbean Sea putting much of the Gulf Coast, from Texas to Florida panhandle, on high alert. It eventually made landfall near Creole, Louisiana as a Category 2 hurricane, only 12 miles away from where hurricane Laura caused massive destructions only 6 weeks earlier. Four people died and nearly 150,000 people lost power. The hurricane also caused 10 tornadoes to develop causing additional damages.

Hurricane Zeta: Category 2 Hurricane Zeta made landfall near Cocodrie, Louisiana on October 28 taking the lives of 6 people. The hurricane caused over 2 million people to lose power.

Visit here for a full breakdown of all the storms in the 2020 Atlantic hurricane season.

To watch a great visualization of all 2020 hurricanes and tropical storms, watch this clip produced by NASA.

The Impact

The total economic losses from hurricanes and tropical storms in the U.S. in 2020 are estimated to be $37 billion, ranking the eighth highest total on record. All while scientists are attributing an increasing frequency and intensity of hurricanes to the effects of climate change.

For families living near the Atlantic and Gulf of Mexico coasts, the threat of costly damages from hurricanes is a real concern. There is a large gap in standard home insurance coverage that leaves many families financially vulnerable. Standard insurance policies exclude damages from flooding and limit the insurer’s financial responsibility in the form of hurricane deductibles.

Looking Ahead

The reality is that standard homeowners insurance policies are not sufficient to protect families from the very real and increasing threat of hurricanes. One option to help fill this insurance gap is parametric insurance, a new form of insurance that offers quick and painless support in the immediate aftermath of a crisis. Parachute Insurance is designed to increase financial resilience for hurricanes and removes the need for an adjuster or a lengthy claims process. It pays homeowners emergency cash within hours after a hurricane hit.

The 2020 hurricane season was brutal, and the unfortunate reality is that the next hurricane season could be the same – or worse. We want you to be physically and financially prepared before the next hurricane hits so you can stay resilient to these storms!

Visit our blog to learn more about how you can increase your financial preparedness before the next hurricane.

Hurricanes are a common phenomenon for people living along the East Coast and Gulf of Mexico. Hurricane season runs from June to November. Last year, a record number of six hurricane made landfall on US shores. Yet, despite living with the threat of hurricanes, many people find themselves badly prepared and don’t realize the extent of their financial vulnerability until it’s too late. With climate change increasing the frequency and intensity of hurricanes, this is a growing concern for many families living in areas affected by hurricanes. Parachute Insurance interviewed homeowners in Texas, Louisiana, Florida and North Carolina who suffered damages from recent hurricanes to learn more.

“I didn’t understand my insurance policy before the hurricane struck…I wasn’t aware of everything that was excluded, like flood damages. I didn’t know what a 5% hurricane deductible meant…But I have learned my lesson.” – Parachute Insurance market research participant from Texas.

Many people are financially vulnerable to hurricanes, yet don’t realize the extent of their vulnerability until it’s too late. Let’s discuss why.

Misguided Trust in Standard Homeowners Insurance

While home insurance policies certainly provide protection and have many benefits, there is a misperception around what is – and what isn’t – covered. For starters, standard policies do not cover flood damage, a common and costly side effect of hurricanes due to heavy rain and storm surges. According to FEMA “just a few inches of water can cause tens of thousands of dollars in damage.”

Most standard insurance policies also exclude expenses for tree removal. And yet they are extremely common due to the high winds generated from hurricanes.

Additionally, homeowners insurance policies in hurricane-prone regions often have deductibles for damages caused by hurricanes. This deductible typically ranges between 2% to 5% of the home’s insured value. In other words, for a house valued at $400,000 and a 5% hurricane deductible, the homeowner has to chip in up to $20,000 before the home insurance policy kicks-in. A lot of money not everybody has available. Unfortunately, over half of homeowners either are not even aware of these deductibles or are confused about how to apply them correctly.

Finally, the claims process can be stressful and daunting, especially for families already struggling through a difficult time.

“I had to fight with the claim adjuster over the reimbursement amount. Lots of back-and-forth negotiation. I hated it.” – Parachute Insurance market research participant from Louisiana.

Exclusions, high deductibles and slow claim payments are aspects of insurance policies that are often not planned for yet can cause intense financial and emotional stress on families.

Lack of Emergency Savings

Watching your home get damaged by a hurricane is already a stressful event. Not knowing what portion of this damage will be covered by your home insurance, how you should finance the large hurricane deductible or how to pay for immediate necessary repairs, puts additional pressure on you.

According to the Federal Reserve, 37% percent of adults either cannot pay for an unexpected $400 emergency expense or have to borrow or sell something to do so. Even for families that have some savings, the immediate aftermath of a destructive hurricane will cause additional expenses that can easily cost tens to thousands of dollars. The wait time to receive their insurance claims can deplete any savings left.

As a research participant from North Carolina expressed: “It took my insurer 3 months to approve and pay my claim. I couldn’t wait that long with the repairs. It was a weird situation, but I had to beg my uncle for money.”

Some claims can even be rejected altogether. Having a standard home insurance policy alone is often not enough protection from the financial impact of hurricanes.

Increase your Preparedness

There is not one “hurricane insurance policy” product that covers everything in terms of damages and financial effects from a hurricane. Your best course of action is to develop a hurricane preparedness plan that includes a combination of insurance policies and savings to cover short and long-term expenses. You don’t want to wait until after a hurricane strikes to discover the shortcomings of your home insurance policy. By understanding what will be covered, you can fill any gaps accordingly.

As a rule of thumb, save between three to six months of fixed expenses in cash as an emergency fund. This money can help you recover in the immediate aftermath of a hurricane, be used towards your deductible, or give you some financial freedom as you wait for your claims to be paid.

Parametric insurance can be a useful building block for your hurricane preparedness plan. With Parachute Insurance, you will receive emergency cash within hours after a hurricane hit. We redefine what insurance stands for: quick, easy, and reliable financial protection in times of need so that you stay resilient and recover quickly. It’s that simple.

As you build out your hurricane preparedness plan, consider Parachute Insurance for your first line of defence against hurricanes. You may not be able to predict when the next hurricane will happen and if your home will be affected, but you can ensure that you are financially prepared.