Home Owner's Insurance Question

[Eaglesfan27]

Anyone else have experience with rapidly rising homeowner's insurance rates? I knew that buying a home anywhere in Louisiana post Katrina, we were facing some potential difficulties with finding insurers and that we would be paying a high premium. However, the initial year of homeowner's insurance wasn't too high considering the value of our home.

A year later, it almost doubled but I had no choice as no other companies were offering insurance. Now, I just got a call from my insurance agent that I was dreading - my homeowner's insurance is going up about 60% more if I stay with the same company (despite no claims in these first 2 years.) Worse, they want to add some provisions about "wind damage" and raise our hurricane deductible. Now, we are getting into some ridiculous amounts for premiums and they are adding exclusion language that I'm most likely going to be uncomfortable with. I imagine they would be raising the amounts even more if it wasn't somewhat regulated. Anyone else seen 60-80% yearly increases in their premiums? Is that normal? I imagine the Gulf Coast with the recent spat of hurricanes is a very atypical market.

My agent wants me to come in and thinks she can get us some better deals with other companies, but other companies will only insure new clients if we switch our car insurance to them as well. As bad luck would have it, I just renewed a 6 month car insurance policy and just paid the premium in full for that but she thinks she can work around that.

[kcchief19]

It's certainly the Katrina factor. I know homeowner's insurance rates here have seen the normal increases but nothing at that level. Then again, there's some regulatory barriers here at the state level that prevent companies from raising rates too fast unless there is a claim reason.

No different then cell phones and everything else, insurance companies will typically give you a lower introductory rate to switch and then raise the premiums once you're in, hoping you won't bother to go shop. If you're ready, willing and able to switch companies every couple of years, you can usually save money. It's just more work than most people will put into it.

I have heard of rates jumping that much around here but only for homeowner's with claims.

[Flasch186]

I believe you car insurance premium is refunded to you on a pro rata basis should you switch.

[Ksyrup]

Welcome to Florida 4 years ago. I'm not familiar with LA or where you live relative to the coast, but in Florida, they enacted a state-run Joint Underwriting Association (now a quasi-governmental insurer called Citizens Property Insurance Corp.) to provide insurance to people who can't get insurance from the admitted market, and a state-run Hurricane Catastrophe Fund to provide reinsurance to insurers, as a result of Hurricane Andrew after 1993 (and tweaked most recently to deal with the hurricanes of 2004). Most people on the coasts saw ridiculous increases in 2005-2006 - a lot of it premised on rate increases companies argued they needed based on the latest "100 year storm" hurricane cat modeling programs.

Florida's obviously in a better position than most states on this, having dealt with it for 15 years. But there's still an effort to get some sort of federal cat insurance program up and running. And Florida is hardly in a "good position." Most rates on the coasts are horrendous, and I know when I was still there, the cat fund had the power to surcharge insurers if the reinsurance got hit at certain levels, which of course is permitted to be passed along to insureds. So everyone was paying a subsidy to make sure the Cat Fund and Citizens could continue to function after the 2004 hurricanes.

I just took a quick look, and Louisiana has enacted a state-run insurer similar to Florida's, called the Louisiana Citizens Property Insurance Corp., as well as a FAIR Plan and Coastal Plan (again, modeled after Florida). I doubt you're going to find much relief from these plans - they're essentially in place to make sure you can get insurance if the admitted market refuses to cover your home - but at least it offers another option.

[Eaglesfan27]

That plan (the state run insurer) is actually my current provider and was the only option for insurance in 2006. They are the ones jacking up my prices now.

[lordscarlet]

Try being within a mile of the White House. Terrorism insurance is expensive.

[Ksyrup]

Originally Posted by Eaglesfan27

That plan (the state run insurer) is actually my current provider and was the only option for insurance in 2006. They are the ones jacking up my prices now.

Um...then you're screwed. Honestly, unless there's some legislation currently pending that would help you. I know the move in Florida was to lessen the burden on the rest of the state subsidizing coastal/high impact area owners, so you're basically going to pay for where you live.

[Ksyrup]

Your only other option would be to look at the surplus lines market, but I hardly think you'd get a break on premium there. In fact, with the extra fees/taxes you have to pay, assuming you could get a quote it probably wouldn't be a competitive price. Surplus lines is coverage from a non-admitted carrier (not licensed in your state) that is eligible to offer certain insurance coverages. Typically, it's stuff most companies won't cover - exotic cars, expensive jewelry, etc. In Florida, surplus lines counts for less than 5% of homeowners premium, and my guess is most of that is from hugely expensive estates/homes. You could at least inquire about it with your agent - not sure what the rule is in LA, but in most states your agent has to document that he couldn't place your risk with an admitted carrier before going forward with a surplus lines insurer.

[Eaglesfan27]

Originally Posted by Ksyrup

Um...then you're screwed. Honestly, unless there's some legislation currently pending that would help you. I know the move in Florida was to lessen the burden on the rest of the state subsidizing coastal/high impact area owners, so you're basically going to pay for where you live.

Yeah, that is my fear and hence the post which was partially a vent.

My agent seems to think that some of the major insurers are now ready to take on new clients in LA, that I'm a good risk, and that I could get a price break if I'll give them my business of car insurance as well. Mrs. E and I will meet with the agent Monday morning (I go into work late on Mondays) to explore options.

Edit: But I appreciate the good advice. I'll certainly ask her about those other options, just to make sure that she has thought of everything.

[Ksyrup]

Surplus lines is not an ideal solution. Among other negatives, there is no guaranty association coverage, meaning if the insurer fails, there's no state backstop.