Higher Homeowners Insurance expected in 2013

Homeowners insurance ratesAnother active year of tornados, severe storms and Super storms for 2012 homeowners

 You can take it to the bank that 2013 is going to be looking at higher home owner’s insurance rates across the US.  The Midwest suffered one of worst hail seasons in recent history and rates in that part of the country are already seeing premiums jumping 20-30%. 

When faced with golf ball and softball size hail, homes and especially vehicles don’t stand a chance.  Just imagine a brand new car looking like a dimpled golf ball from front to back and not a piece of glass intact.   Quickly you’ll realize how claims can rack up fast.   Now think about the typical American home with the standard asphalt shingled roof, which looks like someone took a hammer to nearly every square inch, pitting it to the point where water begins to leak in.  Metal siding looks like someone used the house as a piñata and vinyl siding shows like target practice from the neighborhood kids with their BB guns had a couple days of fun, when in fact only took minutes.

Then there’s the end of the year surprise which will be remembered for many, many years in the northeast call Super Storm Sandy.  What started as a tropical storm, soon morphed into a Category 1 storm off the coast of the Northeastern United States.   The storm became the largest Atlantic hurricane on record (as measured by diameter, with winds spanning 1,100 miles) Preliminary estimates of losses due to damage and business interruption are estimated at $65.6 billion (2012 USD), which would make it the second-costliest Atlantic hurricane, behind only Hurricane Katrina. At least 253 people were killed along the path of the storm in seven countries.

Insurance is really simple –

It’s designed to remove or reduce the risk of loss to the owner of property for a fee.  Insurance companies spread insurance risk over a city, state and a nation to balance out the chance of concentrated loss in one area.  But, when you have risk becomes bad risk as in Florida (and now potentially the entire Atlantic coast) insurance companies are forced to raise premiums elsewhere to even out exposure to financial loss. 

50% of the population lives within 50 miles of a coastal region

Insurance carriers are continually reviewing pricing strategies or eliminating risk all together by pulling out of regions or even entire states.  This process will ultimately put pressures on non-storm related areas to become better profit centers and pick up the slack from abandoned areas.  The first step in this process is requiring home polices to be accompanied by the more profitable auto policy.  The so called bundling process can have saving (but read my article on un-bundling and saving money) advantages but if you’re driving record is not in top shape you might be paying a lot more with a preferred insurance carrier or not be able to obtain.

Bottom line – just as you can count on death and taxes you can assume higher homeowners insurance premiums, especially when “Super Storms” keep the insurance industry guessing where the next big one will happen.

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