Flutterby™! : Fire season and housing starts 2007-10-24 15:42:01.558247+00

Fire season and housing starts

2007-10-24 15:42:01.558247+00 by Dan Lyke 12 comments

As Bush makes the rest of us pay for people who didn't buy insurance, I've been wondering about the effect of this year's California wildfires and whether all that reconstruction will help buffer the economy against all of those in the construction industry who'd otherwise be out of work.

(And, yes, it is fire season, locally we had rain on Friday evening and sixteen acres burned on Saturday)

I live in a fire-prone area but not an earthquake prone area. I can't get fire insurance, they refuse to cover us here, but I can buy earthquake insurance.

My girlfriend's mom lives in an earthquake problem area in the San Fernando Valley. She can't get earthquake insurance without paying half of her income to the insurance company, but her fire insurance is easy to get.

Back when I lived on the gulf coast, private insurance companies will not offer flood insurance, that has to be bought through the government. Since we weren't in a flood-prone area, we were able to get it. Hurricane Georges came through and we had six inches of water in the house, a tree fell on our house and destroyed the fence.

Our house insurance fixed the roof and the fence, but wouldn't cover any of the contents because it was caused by flood. Our flood insurance told us that they wouldn't cover the contents of our house because it wasn't a flood, it was wind-driven water.

Sometimes when people are able to buy insurance they still aren't covered. Sometimes though, we can't buy insurance at all.

First of all, insurance isn't always what it's made out to be. It's sold as cover for anything that might happen, but in practice the hard-to-understand policies offer lots of leeway for the insurer to get out from under reimbursing when something does actually happen. Depending on the company, the claim and the client, this leeway may or may not be used. How 'generous' an insurer is in paying back claims should be a criterium when buying insurance, but as far as I know this is not data that is available in the public domain. A great pity as I would definitely use it.

Second, I don't think it's unreasonable for an insurer to raise the insurance premium for a certain type of event in a high-risk zone. An insurance company is not a charity and it should charge according to the likelyhood of the event happening. When the likelyhood of an insured event happening approaches 1, the insurance premium should normally be equal to the amount paid out by the insurer. One could argue that if you choose to live in a high-risk zone, the risk is yours to bear. If the state believes that people should be able to live in a high-risk zone, the state should act as an insurer.

I agree entirely with you, I just don't think that everyone involved is automatically too lazy or cheap to get insurance to cover themselves. Sometimes there are extenuating circumstances. I love living where I do... hiking, boating, kayaking, camping, little civilization and a lot of wildlife... one of the risks is that a fire may come through. I can't get insurance for fire, but I keep up my defensible space but without insurance, that's all I can do for prevention.

On the other hand, girlfriend's mom is living within 10 miles of where she's lived for the past 74 years. Her friends, most of her family, everything she's ever known is within a short cab ride of her current house. Having her move because of earthquake potential is like telling a black guy to move to africa to avoid racism. Some people can't abandon everything they've ever known and loved at a drop of a hat because they're at risk of something potentially affecting them.

After all, where are they going to go anyway? The southwest has drought and fires. The northeast has volcanoes and floods. The northeast has massive blizzards every year. The southeast has tornadoes and hurricanes. The central part of el Estados Unidos has droughts and floods in the same year. No matter where you move, there's always an inherent natural danger.

#Comment Re: made: 2007-10-24 19:08:45.962962+00 by: ebradway [edit history]

<grin>I was just asked to join an inter-departmental Battle of the Paradigms and one of the initial queries was to link Global Warming and Sub-Prime Mortgages. Already did that...</grin>

Eric, giggle: "Flutterby: anticipating the water cooler discussions so that you don't have to."

JT, what you describe is a matter of hiding the true costs of living some place. Yeah, insurance companies suck, but beyond that their business is trying to figure out what the real cost of living somewhere is, and spreading that amount over the homeowners in that area such that local variations even out. If you can't buy insurance, you're taking a risk to live there. Which is fine, I just cringe when I don't take that risk because I see it as a bad economic decision, yet I'm still asked to live with the consequences.

Dan, after hurricane Georges, we received no magical check from the federal government that soothed all of our woes. We replaced carpet and sheetrock and bought furniture when money became available. We fought with the insurance companies until we were blue in the face and got nothing but a bunch of finger-pointing at "the other guy". It's part of the cost of living in any area. The federal government doesn't come in with a money-blower truck spewing cash every direction whenever there's a natural disaster. A lot of people take a huge loss and we gather our things and make the best with what we have. We rebuilt our house, helped rebuild mom's and my step-dad's business. None of us received anything from FEMA with the exception of a check that covered about a week's groceries, and our insurance didn't pay anything near what our actual damages were.

If we get hit by another fire here, we buy another trailer and have it moved onto the lot. Fire insurance won't cover people in our valley because of the idiots who don't use defensible space, but that's part of living in an area too... you have to pay the price of those who have already abused the system. So, in the place where I had insurance that wouldn't pay anything, I appear to be in the same boat in a place where I can't get insurance in the first place. Well, with the exceptions of a lack of premiums.

#Comment Re: made: 2007-10-24 22:23:52.360699+00 by: Dan Lyke [edit history]

JT, good for you. My problem is when the scale of a disaster hits some magical point there's all of a sudden a shift such that often the large risks are left uncovered and unaccounted for. If my house burns down from a fire, that's my problem, as I think it should be (modulo a good neighborhood watching out for each other, but that's a voluntary thing), but if the neighborhood burns down all of a sudden it's a federal problem. That article said:

and while I'm happy to argue about who should own infrastructure I think it's pretty plain that right now that's a government issue, and as such it's reasonable to scale that up the hierarchy (although that argument is how PORC happens), but "uninsured losses" from tax dollars always tweaks my "I'm paying for that lack of planning" button.

JT, I think you can sue BOTH insurers at the same time, and the judge will determine which one is responsible for this (un)flood-damage.

#Comment Re: made: 2007-10-25 10:11:38.518852+00 by: jeff [edit history]

My advice? Stay out of our health-care system, and simply accept the rewards/risks of living in certain geographic areas. Insurance companies are in business to make money, and nothing more than that. On the minimalistic side, less is more.

#Comment Re: made: 2007-10-26 18:56:26.019784+00 by: Mark A. Hershberger

Above article claims that stucco houses with red tile roofs have a higher chance of surviving these fires. True?

I believe so, but landscaping and other construction details can make a lot of difference. Here's an article on building for fire resistance, interestingly big eaves are something you generally want for energy efficiency, but apparently not for fire safety.