Car Insurance Rates Following a Natural Disaster

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Here's what you need to know...

  • After an insurance companies has paid a large number of claims due to a natural disaster, they will have to raise rates to recoup the costs
  • In areas prone to certain disasters, insurance will be permanently more expensive
  • In an effort to reduce natural disasters due to carbon emissions, many car insurance companies are offering discounts for earth-friendly vehicles

Things like natural hazards and natural disasters can affect a person’s car insurance by either damaging their car directly or influencing the car insurance market as a whole.

While it’s always common sense to try not to drive in or near hurricanes, tornadoes, tsunamis, and other types of storms, the reality is that your car can suffer damage in a storm simply by being parked in the driveway.

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Additionally, your car insurance rates might go up if some type of storm devastates your area or another area, even if you and your auto suffer no damage. When insurance companies have to make large payouts to some policyholders, all policyholders can end up footing the bill.

The Difference between a Natural Hazard and a Natural Disaster

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The terms natural hazard and natural disaster are regularly confused.

Natural hazard is the term given to certain weather events.

These weather events can include:

  • tsunamis
  • hurricanes
  • tornadoes
  • earthquakes
  • volcanoes
  • pestilence
  • droughts that affect food crops
  • lightning storms
  • wildfires

While the natural hazard is the weather event itself, a natural disaster is the effect. these natural hazards have on people. A natural hazard becomes a natural disaster when there is a loss of life or extreme property damage.

The side effects of a natural hazard can become a natural disaster.

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How a Natural Disaster Can Affect the Car Insurance Market

Most people understand how an individual’s car insurance premium can increase when they have to file a claim for a car that has been damaged in a storm or other natural hazard.

People might not be completely aware how a major natural disaster can affect the rates of a person that was in no way involved or affected by the natural disaster.

If a natural disaster causes an insurance company to have to pay out millions in claims to keep the insurance company from failing, they might have to increase the insurance rates of all of their policyholders.

During the period directly following a natural disaster it might even be in the insurance company’s best interest to not offer new coverage for a short time.

If a certain area experiences multiple natural disasters in a short window of time or if a certain area is more prone to things like tornadoes, hurricanes, and earthquakes, the cost of certain insurance coverage can be increased permanently.

An example of this might be how flood insurance coverage often costs more in areas that are more prone to flooding because they have more annual rainfall or are more prone to hurricanes.

So naturally, flood insurance coverage would cost more in Florida than it would in Kansas. A person would pay more for wildfire coverage if they lived in southern California than they would if they lived in Oregon.

How the Green Movement Is Affecting Car Insurance

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The Green Movement focuses on reducing energy demands and carbon emissions. There is increasing evidence that high carbon emissions and high energy demands have an adverse effect on the weather throughout the world.

One of the ways this happens is that certain weather events become more severe.

More severe natural hazards equals more damage and a more adverse affect on the insurance market.

Since the insurance industry recognizes how “going green” can benefit their bottom line in the long run, they have started to invest in the Green Movement.

Some of the ways the insurance industry is investing in the Green Movement are by offering discounts for more earth-friendly cars and by donating money every year to “green” charities and organizations.

Many leading national car insurance companies offer a five-percent to ten-percent discount to policyholders who drive a more earth-friendly car.

Some of these cars include hybrids like the Toyota Prius and cars that have been modified to use biofuel instead of fossil fuels or to produce less carbon emissions.

More earth-friendly cars not only offer the policyholder the chance of a discount on their car insurance but also tend to be much safer. Cars that do not rely on fossil fuels are less likely to catch on fire if they are in an accident.

The majority of these earth-friendly cars have been manufactured in the past six to seven years, which means they have been manufactured under much stricter government safety regulations.

Earth-friendly cars also tend to be made out of more impact-resistant materials, have brighter lights, and have airbags not only in the dashboard and steering wheel but also at the sides of the car.

What to Do When a Car Is Damaged in a Natural Disaster

When a person’s car is damaged in a natural disaster or by the effects of a natural disaster, they should contact their car insurance provider as soon as possible to file a claim.

They should take photographs of the damage and provide their car insurance company with any relocation or contact change information. With some natural disasters, there could be a time limit to file a claim.

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