Shopping for Insurance

The residential mortgage market was a major contributor to an economic slowdown in the U.S. in 2007, and homeowners found themselves paying more for homeowner's insurance -- if they were able to find it.
Homeowner's insurance protects homeowners from damages to their home that are sustained from bad weather, tornados, fire and similar casualty losses. (Flood insurance is sold as a separate policy.) It also protects them from potential liabilities that occur on their property -- a neighbor's child who falls on the driveway, for instance.
Mortgage lenders require borrowers to obtain a homeowner's insurance policy as a means of protecting the collateral of their loans. Since the insurance industry is regulated by state commissions, availability and affordability of homeowner's insurance varies among states. The National Association of Insurance Commissioners (NAIC) maintains a directory of state offices at its Web site.
The St. Petersburg (Florida) Times reported in September 2006 that Florida insurance regulators had granted Allstate Corp. permission to hike homeowners' premiums an average of 50% and granted State Farm permission to increase premiums by 52%.
In Texas, premiums have doubled in some areas while the number of homeowners whose policies were not renewed has soared. Even after insurance reforms in Texas in 2003, Texas still has the highest homeowners insurance rates in the country followed by Florida and Louisiana.
What are some of the reasons for these premium hikes and the drying up of policy coverage?
Major sources of blame are a rash of weather-related catastrophes, higher home-repair costs and the emergence of mold claims, says Robert Hartwig, chief economist for the Insurance Information Institute.
While mold claims have been around for a long time, Hartwig blames an explosion in claims and related lawsuits for directly impacting the availability of homeowner's insurance in Texas. Mold-related claims in Texas increased nearly 1300 percent between the beginning of 2000 and the end of 2001. Over the same period, insurer payouts increased more than eightfold. Mold coverage is now frequently limited or included in a homeowners policy only at additional cost.
In addition, home-repair costs are increasing at 7% a year -- well above the average rate of inflation, Hartwig says. Together, these factors are contributing to an average annual increase of 4% hike in premiums for homeowner's insurance for 2007, the Institute estimates.
Sure, homeowner's insurance is harder to come by and more expensive, but if you apply some of the basics in this educator you shouldn't have too many problems.
2008-07-21 17:09:15
Read Full Story