Homeowner's insurance policies rarely cover every possible event that might damage the home. These exclusions can bring about significant out of pocket expenses to the homeowner and may lead them to seek other policies to cover those exclusions.
The problem with this is that getting multiple policies to cover as many eventualities as possible is pricey. Affordability is the single biggest problem when it comes to all inclusive insurance policies.
With the increase in population in high risk areas and the increasing numbers of devastating storms in those areas, the GAO has been asked to study the viability of private insurers offering more comprehensive coverages for events that are now excluded.
The main problem with more comprehensive policies is that they would have higher costs. Consumers would be less likely to buy these more expensive packages even if insurance companies charged based solely on risk. With the increased costs and lower sales the insurance companies run the risk of losing money, which is the main reason they are reluctant to do it.
The insurance companies have cited evidence to show that consumers simply do not want to pay more on insurance, using the Flood Insurance Program as their evidence. Despite the increased protection, consumers generally opted to not get the coverage as it increased their expenses.
It has been noted that insurance policies are one of the expenses home owners typically try to keep as low as possible, this leads many insurers to worry that only the highest risk homeowners would actually buy such a product.
To summarize; the main issues that must be addressed in order to get more comprehensive insurance packages are the following:
Insurance companies would need the ability to accurately predict the potential risks involved so that they can know with reasonable certainty if it's cost-effective or not.
Additional, consistent efforts to mitigate the damage brought about by natural disasters such as floods, earthquakes, and hurricanes, as well as other policies to improve home construction to better withstand these events.
All in all, while it will certainly be a challenge to get more comprehensive insurance packages, the hurdles are not insurmountable. With proper cooperation and a demand by consumers, it can be made worthwhile for insurance companies to offer more inclusive insurance policies so that homeowners do not need to worry about whether their policy covers the natural disaster that just demolished their home.