Home Owners Insurance Blog

Under usual circumstances, a homeowner never has a problem is getting his home insured at a reasonable premium. But, what if you own a mobile home, the same rules do not apply and you could be in for a surprise, when you hear from your insurer that your policy is being cancelled!If you own a new or relatively new mobile home, you would not have a problem in getting it insured. But, as it starts getting older, insurers tend to start getting wary and either they jack up the premiums or cancel the policy.

If we review the situation in Florida, mobile home owners in Manatee County feel that they are left with three options. They either have to pay higher premiums for their mobile homes, or they have to pay double the premium with the state’s insurer of last resort Citizens Property Insurance Co. or have no insurance at all.

What happens when the insurer of last resort is about to go bankrupt? We begin to question our faith in the insurance industry and wonder if all the dollars we paid for our home insurance might go bad.

Such is the plight of Citizens Property Insurance Corp after having made huge payouts on account of the infamous hurricanes, Rita and Katrina. It is being touted that the state run insurer is left with enough money to make payouts for another week. According to a company spokesperson, the insurer is left with about USD 64 million and has been making average daily payouts of about USD 5 million, with the rate of payouts slowing down now.

The board of the insurance company is making desperate efforts to raise bridge loans and has approached JP Morgan to recommend a strategy. It is believed that JP Morgan Chase has agreed to extend a loan of USD 125 million and will attempt to raise another USD 25 million through syndication. While, this amount will serve as a bridge loan, the insurer is expected to raise USD 200 million through a bond issue, which will hopefully pull it out of its travails.

Insurers and home insurers in particular have been hard hit by the serial hurricanes that ravished some parts of the US. It is important for us to understand, how these hurricanes will impact our future.

Allstate, the nation's second-biggest auto and home insurer was strung by third quarter losses amounting to USD 1.55 billion due to hurricane related payouts amounting to USD 3.06 billion. To avoid such volatile outflows in the future, the insurer has bought reinsurance to cover itself for future disasters. Reinsurance is insurance bought by an insurer. The insurer’s new reinsurance costs have gone up three folds to USD 600 million. Unfortunately, Allstate did not have a reinsurance cover for the regions hit by Rita or Katrina. So how will the insurer make good these increased costs and the losses that it has suffered?

To begin with, the insurer is planning to reduce its workforce by 600 to 700 through a voluntary buyout program, although it denies that this has anything to do with the recent losses. But, the story is not limited to this. To improve its financial health, the insurer will have to raise its premium levels. A similar industry wide increase is expected and it is likely to impact all of us.

We usually feel very happy once we get an insurance cover for our home. However, how many of us have faced the situation of making a claim against our insurance. This leads us back to introspect the fact that did we read our home insurance contract before signing on. If we did read it, was it a very reader friendly document or we couldn’t make much sense of it.

In reality, home insurance contracts are extremely complex documents and lay individuals like us would hardly have the patience to read through, leave aside understanding it. The clauses are usually drafted in such a way that they have multiple meanings. Insurance companies will tend to take advantage of these clauses in cases where multiple claims pour in due to a disaster as is in the case of the series of hurricanes.

Courts would usually tend to favor the claimants as they understand that the clauses are subject to multiple interpretations and an insurer will attempt to construe the interpretations in his favor. This implies that homeowners will need to move courts to recover their claims, which is not the best situation after having your home raised by a hurricane and having no place to go.

Louisiana is witnessing an increase in homeowners insurance business, says the chief executive officer of Citizens, a one-year-old homeowners insurance company. The company is predicting the doubling of growth as compared to the current position. This prediction stands in spite of high premium charged by Citizen as compared to other top rated homeowners insurance companies in Louisiana. Homeowners insurance in Louisiana safeguards the high-risk insurance areas and individual insurance business.

The Federated National Insurance has filed request with the Florida state regulators to hike the homeowners’ insurance rates by close to fifteen percent. The rate hike is primarily aimed at cover risk of hurricanes, rising construction prices and expensive reinsurance. The company had to make a large insurance payout in the previous year. The use of the ‘use and file’ option and the deliberate attempt to avoid a public hearing on the rate hike issue has irked those opposing this hike in home insurance premium.