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.

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.

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.

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.