Posts Tagged ‘tornado’

Tornadoes Make $7 Billion Disappear from Insurance Industry

Thursday, June 9th, 2011


(photo credit: Mike_tn)

Here’s how insurance works for you: Instead of paying $200,000 to rebuild your house after it’s been destroyed in a natural disaster, you pay $200 a year (called a premium) to an insurance company that will cover the whole bill in the event that such an unfortunate thing occurs.

Here’s how insurance works for insurance companies: A lot of people pay you $200 a year for protection against the very unlikely possibility that their house will be destroyed in a natural disaster. You profit.

(Of course, you have a team of people with calculators and maps who spend every single day figuring out the likelihood that your customer’s house will, in fact, be destroyed in a natural disaster. If the odds look good, you’ll either charge them a higher premium or refuse coverage altogether.)

Here’s what happened between May 20th and 27th: Hundreds of tornadoes destroyed $7 billion in property, which the insurance companies now have to pay for. That makes 2011 the most expensive year EVER for these companies.

But… better them than you, right?

Here’s why you need insurance.

What happens when disaster aid organizations are destroyed?

Tuesday, May 3rd, 2011

Cullman-Alabama-EMS.jpeg
(photo credit: southerntabitha)

We’ve written before about how to give smart in the wake of a disaster, and unfortunately the situation just keeps coming up. While not as devastating as the earthquake and tsunami that devastated Japan in April, the string of tornadoes that tore up the American South last week has left hundreds dead and thousands homeless.

One of the pieces of advice we passed on is to stay thoughtful when you’re practicing “crisis philanthropy.” One way to do that is to focus your giving on organizations with a local presence in the affected area. But what if there are none left?

That isn’t exactly the situation in Tuscaloosa, but the Salvation Army – a local charity giant – lost two buildings in the tornado, both of which could have really helped with relief efforts. We thought this might be a good time to point out the differences between program costs and operational costs, which are the two types of expenses you’re funding when you write a check to your favorite charity.

  • - Program costs refer to money spent on the projects you hear about during fundraisers – feeding the poor, building temporary housing for flood victims. The exciting stuff.
  • - Operational costs (sometimes called overhead) refer to more boring stuff – the electric bill, the salary of the person who answers the phone, the new office downtown.

People tend to want their money to go to program costs because it makes them feel good about themselves. But in most cases, paying for operational costs is just as important. Who will administer lifesaving vaccinations if an organization can’t afford to pay clinic staff? And who knows how much more prepared local organizations could have been had they had the extra cash to spend on additional locations or a disaster preparedness program?