Who Manages Payment For Natural Disasters?

Natural disasters like earthquakes, hurricanes, and tornadoes have the power to upend lives and put a substantial financial burden on governments, residents, and businesses. In addition to that, large-scale disasters like hurricane Harvey and Katrina caused damages that cost billions of dollars.

Rebuilding expenses are borne by property owners, federal disaster funds, and insurance policies.

Natural Disasters Are Getting Common

Dangerous natural disasters have always taken place, but data by the US government shows that disasters have been occurring at a greater frequency over the last few years. According to statistics by the National Centers for Environmental Information, the years between 2010 and 2019 experienced over a hundred weather and climate disasters costing more than $1 billion—an average of $80.2 million worth of damage every year.

Paying for Natural Disasters

Weather and climate calamities cause indirect and direct financial damage to the economy.  The direct costs are the damages to the home, power lines, and roads. However, we must note that natural disasters impact the local communities through business disruptions, property damage, and health costs of the employees.

While most natural disasters can create extensive damage to commerce and property, hurricanes have wreaked the most amount of havoc in recent years. The combination of heavy rainfall and high winds can cause a lot of damage to an extensive area in a matter of hours.

Hurricane expenses are typically covered by different private and public sources. For instance, the expenses for Hurricane Harvey that hit Houston in 2017 caused around $130 billion worth of damage. This cost was covered by the following:

• FEMA (Federal Emergency Management Agency) offered payments to local and state governments and the National Flood Insurance Program.
• US Small Business Administration offered a home and business loans.
• Block grants.
• US Department of Housing and Urban Development
• Local and state funds
• Insurance companies.

Impact of Disasters on the Economy

Natural disasters bear a heavy price for some businesses like restaurants and stores that depend on local customers. They can also be damaging on emotional levels because people lose their loved ones and assets.

Research shows that, if we just consider the economy, the impact of natural disasters is often regional and impacted businesses can quickly recover from the effects and replenish their inventories. For instance, a big storm like Harvey caused an $8.5 billion impact on the economic output, a small fraction of the US’s mammoth $19 trillion GDP.

According to the economists at the University of Illinois and University of Chicago, the impact of Hurricane Katrina was small, although it caused a lot of destruction at the Gulf Coast. After the hurricane and the flooding, people and businesses came out better than areas unaffected by the hurricane. In addition, the income levels in the affected areas were found to exceed the ones in unaffected areas.

Looking for Insurance Coverage in Los Angeles?

Farmers Insurance understands the insurance laws of California like no one else. If you’re looking for Natural Disaster Insurance LA, get in touch with them or request a quote to learn more.