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What is Parametric Insurance and Should You Buy It?


Hurricane season might have ended, but it will roll around soon enough. Consumers who do not have enough insurance still have time to buy homeowner’s coverage to cover windstorm damage and flooding insurance for the damage caused by rains and rising floodwaters.

But, according to Market Watch, consumers have a new insurance option—parametric insurance. This type of policy differs from typical casualty insurance and might be an attractive option, depending on a person’s individual circumstances.

Payouts for Triggering Events

To better understand parametric insurance, let’s contrast it first with casualty insurance, such as windstorm damage. With the typical insurance claim after a hurricane, a homeowner suffers damage to their property and needs compensation from the insurer to repair their home. The claim should cover the cost of repairs, up to the policy limit, as well as other related expenses, such as the cost of temporary shelter.

Parametric insurance is different. Instead, a policyholder gets a payout whenever a triggering event occurs. For example, if a named hurricane lands in Florida, a policy holder might get a payout, regardless of whether they suffered damage to their home.

This last bit is key. A person with parametric insurance would not need to suffer a financial loss to receive compensation under their policy. Consequently, policyholders would not need to deal with adjusters who come out to haggle over the extent of property damage.

Parametric Policies Already Exist

These types of policy might be new to many readers, but they currently exist. The State of Louisiana, for example, already has a parametric policy in place if the state get shit by a named hurricane with sustained winds of at least 80 miles per hour. The policy pays up to $1.25 million.

In Florida, some companies have begun marketing parametric policies directly to consumers. One of the companies mentioned by Market Watch is Assured Risk Cover, which has offered a parametric policy for hurricanes since at least 2017. It has been approved by state regulators, so it is a legitimate insurance product.

Should You Buy a Parametric Policy?

Whether you should rush out and get a policy requires many of the same considerations that go into buying any type of insurance policy:

  • What are the costs? The goal of buying insurance is to protect yourself from risk, not to spend too much money. Assured Risk Cover, for example, charges a premium of around 7% of their coverage amount. So someone with a $10,000 policy would pay around $700 a year.
  • What are your goals? These policies are not currently designed to cover the full value of someone’s property, so avoid buying if that is your goal. Instead, many people purchase one to help pay the deductible on their homeowner’s or flood damage policy.
  • How comfortable are you with risk? You might already have enough money socked away to financially survive a hurricane. In that case, you might not want to buy this insurance.

We Can Help You Make a Hurricane Insurance Claim

If a hurricane or other storm has damaged your home, you might benefit from our help. Please call the Daytona Beach wind damage attorneys at Bundza & Rodriguez, P.A. at 386-252-5170 to schedule a consultation.


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