Home Owners Insurance Blog

Laws and regulations in several states allow insurers to cancel homeowners insurance policies if too many claims have been made. In Maine, the law permits and insurer to cancel a policy if more that one claim is made in 12 months. These laws have been instituted in part to deter bogus homeowner insurance claims and in part to protect insurance companies.

However, it is unclear whether the insurer can drop the policy after having accepted the premium payment for a certain period. Empirical evidence suggests that insurers have cancelled policies mid-way after having accepted the premium. The policies were dropped on the pretext that the claimant had made too many claims.

These regulations were adopted initially as insurers were not becoming profitable. However, it does lead one to introspect that if insurance is unable to protect people from financial losses occurring due to unforeseen damages, what good is it.

As the insurance payout numbers for Katrina pour in, it is easily the biggest ever insurance disaster to hit the US. Payouts for flood related claims are also the highest. The combined payouts are in the vicinity of $60 billion. It is almost twice more than the insurance claims for 9/11 related destruction, which till now was the highest in the US history.

Flood related claims that have been settled till now amount to $11.4 billion and are expected to touch $16.4 billion after final settlements. Citizens insurance has settled nearly 40,000 claims till date with an average payout of $12,645 per policy. Other homeowner insurance companies have settled nearly 480,000 claims amounting to a staggering $7.5 billion in Louisiana alone. The average flood payout is a record $101,018 with the previous highest average flood payout being $17,000. Average flood payouts in certain regions touched $135,000.

These numbers clearly indicate the fury of Katrina and indicate how powerful nature’s destructive forces can be. Click here to read more about Katrina related insurance payouts.

When you go in for homeowners insurance, man’s most faithful pet, the dog can pose a likely problem. Depending upon the breed of the dog insures by law, can actually deny you insurance or charge you additional premium. Some insurers are even persuading their long time customers to get rid of their dog if they want to continue with their covers.

The American Kennel Club has taken a legal position on this issue. According to the organization, insurers should take into account the dog’s behaviour and not its deeds. It goes on to say that a well behaved dog is actually an asset for the home as it can deter intruders from entering the premises or alert the homeowners of an intrusion; in reality, prevent a theft from occurring and there seems to be no reason why insurers should deny covers to homeowners with dogs.

Homeowner insurance is a package policy that provides financial protection< for your home and belongings against disasters. The standard homeowners policy provides coverage for the structure of your home, your personal belongings, liability protection and additional living expenses if your home becomes unliveable due to a disaster for which it is insured.

Different types of homeowners insurance policies include HO-1 that provides limited coverage. It is no longer available in most states now. HO-2 provides protection against 16 types of disasters. HO-3 provides protections against all disasters except those specifically excluded. HO-8 is a policy designed specifically for older homes. HO-6 is a policy for condo owners. It provides protection against all 16 disasters. HO-4 is a Renter’s policy, specifically for those living in rented accommodation. To read more on these policies, click here.

The state of Florida has faced seven hurricanes in the last two years resulting in millions of dollars in insurance payouts. These payouts are exerting an upward pressure on insurance premiums in the state. It has been estimated that payouts resulting from natural disasters in 2005 amounted to a staggering $56.8 billion. Florida lawmakers are proposing that a national catastrophe fund that provides relief to insurers in case of such natural disasters. They are pushing for a national legislation that is likely to take at least two years to pass. Other landlocked states, however, do not want to foot the bill for costal Florida.

Incidentally, Florida is the only state that had set up a state calamity fund in 1993 after Hurricane Andrew to provide relief to insurers. However, the recent wave of destruction has wiped out that fund. A catastrophe fund will also keep homeowner insurance premiums from shooting up as insurers will be able to get assistance from the fund and will not need to factor the excessive payouts into future premiums.

We have all heard about homeowner’s insurance and if we are living in a rented accommodation, we believe that the homeowner’s insurance will provide us sufficient cover. However, homeowner’s insurance does not provide sufficient cover for the tenant. The tenant needs to buy renter’s insurance that will provide him sufficient cover in case of an eventuality.

In a recent case in Chattanooga, Tennessee, a fire destroyed homes of three families and damaged another three. The fury of the fire destroyed everything that the families had worked for. One of the occupants fortunately had a renter’s insurance cover and he is counting his blessings as the insurer is helping him rebuild his home. His insurance cost him $35 a month, which is negligible compared to the loss he suffered.

Hence for renters, it may be a good idea to insure their homes and possessions through renter’s insurance.

Florida’s residents have had to cope with seven furious hurricanes in the last two years, but their misery doesn’t seem to be over. The trouble they are facing now is inordinate delays in processing of their insurance claims. Under the usual practise, insurers pay claims jointly to the homeowner and the mortgage holder. The financing companies usually take very long to endorse these to customers, especially with some mortgage companies being from out of state. For customers this is a very frustrating experience.

Now, Florida State authorities are planning to implement a law that will require the insurer to pay 20% of the claim directly to the customer so that they can start their repairs immediately or at least pay advances to book contractors. The State is also planning to write a separate law that will require insurers to write checks immediately for damaged personal property and living expenses.

In the last few years, the US has seen a runaway boom in the realty market. Low interest rates have been the principle driver of this boom. Taking advantage of these low interest rates, several homeowners have taken loans and refurbished their houses often adding additional rooms and amenities.

However, homeowners have usually not upgraded their homeowner insurance policies and are in all likelihood substantially underinsured. If due a natural disaster or any other cause, their homes were to be destroyed, the homeowner would find himself in a sticky situation. From the insurance support that he receives, he will be unable to rebuild his home to the same standard as it was before.

It would be highly advisable for homeowners, who have upgraded their homes, to upgrade their homeowner’s insurance as well.

Usually, homeowners are of the belief that their homeowner insurance policy provides them protection against flood related damages as well. This is not the case. Insurance against flood related damages is provided by a different agency called the National Flood Insurance program, which is a part of the Federal Emergency Management Agency.

Premiums for flood insurance are calculated according to the location of the home vis a vis the flood plain. Usually, the flood plain is divided into three zones. Zone A carries the highest premium and is usually very expensive. Homes located in the flood plain, fall in Zone A. Zone B and Zone C are located away from the flood plain, with Zone C being termed as the ‘preferred flood program’. It carries the lowest premium.

It has also been observed that most people insure their homes against floods only to the loan value and do not take into consideration the replacement value. Only after the damage is done do they realize this fact, but it is too late by then. Experts recommend that homeowners must take into account replacement costs as well before buying flood insurance.