So I sit here and worry about those that have been affected by the recent hurricanes. I listen to the analysts and the government officials as they talk about dollar amount to be assessed to the damage and how the insurance companies are going to take a pounding. People are talking about how claims will not be paid because the insurance companies simply will not have the resources.
This made me begin to examine my own situation and what would happen if my homes were suddenly wiped out by mother nature. It made me wonder how much would it cost me to replace. Would I be able to lean on my insurance company or would I walk through the rubble only to find out they did not have the money to pay the claims. So I did some simple math to see how much I had paid out over the last 25 years, comparing that to how much I had put in to the insurance company in claims. So here is the breakdown and it can be used for almost all of the 50 million homes in the United States.
My annual premiums between the two homes are $2650. So for the sake of argument I will break it down to about $1200 a year per home. So I thought that was pretty reasonable considering the value of my homes and they are both insured for a little more than there value should they need to be replaced. Now I tried to put a claim in for some minor water damage to my Florida home that occurred when Fay decided to rent space in the state for more than week. The total damage was about $10K. The claim is still pending. so in the 25 years I have been a homeowner I have paid out over $60K in premiums and have still not yet received any thing as far as a claim. Well that is not to bad I guess, so that leaves some reserve for the insurance companies RIGHT?
So I then decided to see just how much reserve they had. There are about 50 million homes in the United States and the average premium is about $1100. Sound reasonable right? So lets do the math. That would be just under a $100 bucks a month times 50 million homes. So that is 4.8 BILLION dollars a month.Well that is just about the amount that south florida had in damage for the last category 4 that blew through. Now I do not want to complicate things to much by adding the interest that the insurance companies make on that but lets just say they get a minimal amount, like what you or I would get in a SAVINGS account. Now when we add that to the annual premiums paid out by WE the home owners, we are talking about over $60 BILLION dollars. Now I realize that I have not been in school since the late 70's and there is a NEW MATH, but that dollar amount is more than the total amount of storm damage of all the storms in the past 10 years. Hurricane Katrina was responsible for about $30 Billion in damages.
So to surmise, they have brought in $60 BILLION a year for the last 10 years and have paid out about $65 BILLION in the last ten years. So I am asking the public to help me with the math. How do they not have the reserve to pay for the claims people have. Hard working people who pay for insurance so they do not lose everything that they have worked their whole lives for. How can they claim they do not have the money? The insurance companies have made over $750 BILLION dollars including interest in the last 10 years and have paid out less than ten percent of that.
Who ever believes that we as a country do not need reform is not thinking. Imagine if we added the dollar amounts for all the automobiles insured in this country. I have had car insurance for over 30 years and NEVER had a claim. Who is responsible for this and how does it get FIXED. Keep in mind that this has nothing to do with the CORPORATE insurance dollars spent to insure any buildings other than HOMES. Also keep in mind that the housing market was slightly smaller ten years ago but the numbers still hold true if you add in inflation.