In New Orleans, America Hurricane Gustav is causing so much devastation that it is feared could lead to an estimated £5 billion in insurance claims from homeowners that are affected in numerous ways. Although it fell far short of the destruction earlier predicted, Gustav leaves in its trail the sad memories of Hurricane Katrina, which left both homeowners and the insurance industry reeling in pain following a payout of more than £20 billion.

UK summer plagued by floods

In the UK the above scenario reminds us of our own travail, where each summer, as much as we look forward to it, appears doomed by a repeated flooding. And the last couple of years this has not only made life very miserable for homeowners, it has equally threatened the only hope of compensation, as insurers, struggling to come to terms with last year’s record payout of over £3 billion in claims, threatened to refuse cover for homes prone to floods.

Another fallout of the 2007 summer floods is that home insurance premiums began to hike up to meet the cost of insurance companies. Even as the UK Government promised to do its part to reduce the effect on insurers by securing homes facing the risk of floods, which convinced insurers to withdraw their threat of refusing cover or substantially hiking premiums, the truth is that it still remains to be seen whether this will lead to an enduring solution.

The issue of floods aside, there are several other issues affecting the home insurance industry in the UK, like its American counterpart. Generally, the economy is not doing well and this drift has affected almost every facet. What it clearly means is that as goods and services cost rises while people’s earning power falls, there is bound to be reluctance in subscribing to services even as essential as home insurance. This explains why many homeowners across Britain do not take out home insurance policies despite being obviously exposed to a number of risks.

Flood warnings

As recently as mid last month, for instance, torrential rainfall in parts of the country triggered fresh flood warnings. The Environmental Agency issued no fewer than eight flood alerts following heavy downpours in Wales, Northern Ireland, the Midlands, East Anglia and London.

Times Online wrote that: “Forecasters said every corner of the country was likely to suffer a soaking, as a band of low pressure moved rapidly towards the north-east.” In spite of the threat, one can hardly recall a massive rise in the number of people moving to protect their homes and contents by insuring them.

Many people, as various studies have suggested, still do not take out adequate cover, that is if they take such a major step as purchasing a policy.

With new studies finding that more homes with younger children – from toddlers to teenagers – face greater chances of incidental damage, homeowners need to ponder the issue of home insurance seriously. One essential thing to do is weighing the likely repercussions of not having a cover against the cost of premiums when one is properly insured. The result will, no doubt, ignite many of us into action as we realise what risk we face should the unexpected occur.