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Archive for the ‘Homeowners Insurance’ Category

This week the financial crisis brought more shocking news. General Motors, Ford, and Chrysler executives landed in Washigton on with their corporate jets seeking a share of the $700 billion Troubled Asset Relief Program.

In a shameless display of arrogance and entitlement, leaders of what used to be “best in class” companies begged for billions of dollars with their tin cups outstretched in front of the US Congress. Before the Big Three ever arrived in Washington, billions had already been committed to AIG and some of the largest financial institutions in the country.

During this financial meltdown we’re seeing something we never expected to see in our lives – broken promises from major corporations and government institutions on an unprecedented scale. The day has arrived when large companies and large states like Florida can’t raise the cash they need to meet their promises.

If you are a Florida home insurance consumer the financial crisis has put your biggest asset at risk – your Florida home.

Can you name a more sacred promise than the one a home insurance company makes to you when it takes your money and agrees to insure your home?

When you buy Homeowners Insurance in Florida the insurance company is promising you fast and fair payment of your claim. Florida insurance companies buy reinsurance to help them make good on this promise to you. Reinsurance is backup coverage that insurance companies buy to help protect themselves from big losses above certain levels.

The Florida Hurricane Catastrophe Fund was formed as a way to help stabilize the Florida home insurance market after Hurricane Andrew caused billions in damage to Florida in 1992. By offering reinsurance at affordable rates, the fund helped to make homeowners insurance available and affordable for many years.

That all changed after the Florida hurricanes of 2004 and 2005 when Florida home insurance became overpriced and hard to find again.

The Florida legislature responded to the Florida home insurance crisis by voting in 2007 to expand the reinsurance sold by the Cat Fund by $12 billion – raising its total risk to a total of $28 billion. Florida home insurance companies were required to purchase this additional reinsurance from the state and to pass along the savings realized on reinsurance to home owners.

As a Florida homeowner, you didn’t get the rate reductions that this law was supposed to provide. Your rate cuts never came close to the 24% predicted when the legislation passed. And to make things worse, the Florida Cat Fund took on an additional $12 billion in risk.

Now the Florida Catastrophe Fund has told us that the frozen bond markets won’t be an acceptable source to raise the cash it needs to meet its commitments to the insurance companies after a major Florida hurricane. It recently estimated that it could pay out $13 billion over the next twelve months – That’s $15 billion less than the $28 billion it is on the hook to pay!

What does all of this mean to you as a Florida home insurance consumer?

You didn’t get the rate relief you expected and your state took on financial obligations that it has no hope of paying.

You are at risk if Florida experiences a major hurricane in the next year. Once the losses of your Florida home insurance company exceed certain levels, your company will ask the Florida Cat Fund to reimburse them in order to pay your claim. Since the Florida Cat Fund is short on cash, you might have a long delay in getting your claim paid.

The promise to pay your Florida home insurance claim has never been more at risk than it is today.

Now that you know that the Florida Hurricane Catastrophe Fund will not meet its obligations, let’s examine the National Catastrophe Fund idea that Florida has been bring up in Washington for years. This National Cat fund would offer an additional layer of loss protection above and beyond the obligations of the Florida Cat Fund.

The theory is that a National Catastrophe Fund would be funded in part by insurance premiums paid by policyholders in states that are part of the fund. A National Cat Fund would be a separate fund that would earn interest and grow during the years when there aren’t any claims.

Supporters claim that no taxpayer money would be needed to sustain a National Cat Fund. Storm history tells us there would be times that federal tax dollars would have to be used to offset major losses.

And everyone knows that the federal government can’t keep its funds separate. Just ask someone in Washington to show you the billions that are supposed to be in the Social Security Trust Fund. You won’t be shown any cash – just a drawer full of T-Bills and IOU’s.

Now that the Big Three Auto makers and other shameless Fortune 500 companies have beaten Florida to the punch in Washington, it is very unlikely that a National Hurricane Catastrophe Fund will pass anytime soon. The red ink in Washington will make even President Elect Obama shy away from any additional federal obligations. So don’t look to the federal government to make good on the promise that was made to pay your Florida home insurance claim.

Finally, Citizens Property Insurance Corporation has consistently reported that it doesn’t have anywhere near the money it needs to pay out the almost half a trillion dollars in hurricane exposure it after a major Florida hurricane.

A large hurricane would mean that Citizens can’t pay even its primary obligations – those that it must pay even before losses reach levels where Florida Hurricane Catastrophe Fund reinsurance kicks in. And as a policyholder with Citizens, you are subject to paying higher special assessments after a major Florida hurricane than policyholders who have private homeowners insurance – special charges tacked on to your annual insurance bill.

In this new brave world where even governments can’t keep their promises here are some steps you should take as a Florida home insurance consumer right now:

Get a Florida wind inspection done and harden your home as much as possible.

Avoid Citizens Insurance Florida if you can.

Find a home insurance company that is strong financially and one that has spread its risk across both Florida and other states. Fewer policyholders will mean faster payment of your claim.

Report your insurance claim the same day as the Florida hurricane. This will make it more likely that you will get paid before your insurance company looks to the Florida Cat fund for reimbursement.

Last but not least. The fact that the Florida Cat Fund is short on money has not been lost on Florida home insurance companies. They are being charged for reinsurance by an entity that has publicly stated that it can’t meet its obligations. That means insurance companies are not getting what they paid for.

You should expect Florida home insurance companies to try to buy more of their reinsurance in the private market and not from the State of Florida in 2009. And they will look to pass that cost through to you in the form of higher insurance rates. If they don’t get the rate increases they need, your Florida home insurance policy might be cancelled.

As the Florida home Insurance crisis continues, it has never been more important for you to stay on top of the Florida home insurance market for private insurance. You never know when you might have to find a new Florida home insurance carrier.

Michael Letcher

Whether you already have a homeowners insurance policy or you are looking for the right one for you, do you know what is in the typical policy and what that coverage means? If not, you’re not alone. A lot of people have no idea what their insurance really covers. Unfortunately, many find out the hard way that things they though were covered are not.

Basic Insurance

What do you think your basic home insurance policy covers? Everything that could possibly happen to your home? Not quite. While many of the things you would expect to be covered by your homeowners insurance, like fire or theft damage, will be covered by the policy, there are other things you may think would be covered that aren’t.

Windstorm Insurance

Many people who live in hurricane prone areas think their typical homeowners insurance will cover the price of repairing their home if they are the victim of a hurricane. However, many of the insurance companies that serve these areas insist that you have additional windstorm damage tacked on if you want to be covered for a hurricane.

Flood Insurance

What if your home were to flood? Think your regular home insurance will cover it? Not if you don’t have flood insurance. Flood insurance is almost always an additional coverage you have to tack on to your basic insurance policy. Even if you think your home is built high enough that it will not flood, consider what would happen if sewage was to back up into your home or rain poured in and damaged your home after a storm. Without Flood Insurance, you would be out of luck.

Earthquake

Do you live in an area where there are a lot of earthquakes? You want to make sure you have earthquake insurance to pay for any damage done to your home in the case of this type of natural disaster. Many insurance policies include earthquake damage, but not all of them. You should always double check if you live in an area that is prone to quakes.

The most important thing to keep in mind when you are purchasing Homeowners Insurance is that it is something that you need to make sure is done right before a disaster strikes. Otherwise, you may find yourself with a lot of damage to your home and without the money to repair your home and reclaim your life.

Stephen Sikes

Most people identify their home as their largest asset. Home insurance provides a way to protect this financial investment.
 
What is home insurance?

Home insurance is a legal agreement between an Insurance company and its policyholder. Insurer promises the policyholder financial protection for covered losses associated with owning a home. Policyholder agrees to pay a premium in return for this financial protection.

Homeowners improve their insurance options when they…

- Take care of the property. The homeowner is responsible for routine maintenance and repair – not the insurance company.  Seek assistance/advice from a local housing organization or insurance agent if necessary.

- Prevent losses.  Identify and correct hazards that increase the likelihood of property damage (i.e. replace frayed electrical cords, proper storage of flammable materials) and injury to others (i.e. repair broken steps, clear impassable walkways).

- Show financial responsibility.  Statistics show those with good credit have fewer claims.  In turn they pay less for insurance and have more options.
 
- Property losses covered  by homeowners insurance…
 
Policies vary in the kinds of property losses they cover. Insurers identify “perils,” or causes of loss that describe when property damage is covered.
Covered perils are identified and explained in the homeowners insurance policy.
 
Common homeowners insurance policies…

Insurers combine coverages for dwelling, other on-premise structures, personal property, additional living expense, and liability into one package.
There are different policy packages (called coverage forms) with varying levels of property coverage.
 
Homeowners 2 (Broad Form) and Homeowners 3 (Special Form) are the most common homeowners insurance policy coverage forms.

Some insurers use these generic terms to describe their policies.  Others come up with their own names.
 
Homeowners 2 (Broad Form)

Covers dwelling, other structures, and personal property for losses caused by:

Fire   Lightning  Windstorm
Hail   Explosion  Riot/Civil Commotion
Aircraft  Smoke   Non-owned Vehicle
Vandals  Burglary  Glass Breakage
Robbery and Theft
Volcanic Eruption
Damage from Falling Objects
Weight of ice, snow, sleet
Sudden & accidental tearing apart, cracking, burning or bulging of a steam of hot water heating system
Accidental discharge, leaking or overflow of water or steam from within a plumbing, heating or air conditioning systems or domestic appliances
Sudden & accidental injury from artificially generated currents to electrical appliances, devices, fixtures and wiring.
 
Homeowners 3 (Special Form)
 
Broadens coverage to “open perils” for dwelling and other structures. An “open perils” policy covers all causes of loss except those specifically excluded.
 
Personal property is covered for HO-2 perils.
 
Additional living expense coverage is included.
 
Homeowners Insurance provides personal liability coverage too…

In addition to property coverage, the HO2 and HO3 homeowners package policies include personal liability protection and coverage for medical payments to others.

Liability coverage protects you when you, other members of your household, or your pets are legally responsible for injury to others or damage to their property. If necessary, liability coverage will also pay for a lawyer to defend you.

Read more on auto and home insurance: http://www.autoandhomeinsurance.org

Mike Anderson