De-Mystifying NC Homeowner Rates
Homeowner rates are (and should be) amongst the most heavily regulated products that the consumer has to buy.
Our Insurance Department has two conflicting responsibilities:
1.) Make sure insurance companies don’t overcharge consumers.
2.) Make sure the insurance companies charge enough so that they have a sufficient “bucket of money” when a catastrophe comes.
…and they have to do all this in a politically charged environment.
To that end, the NC Insurance Department reviews and regulates what carriers can charge for Homeowner’s Insurance. With the help of industry rating organizations, they establish a ceiling of “manual” rates. Whenever you read a press release concerning homeowner rates, it is likely that this “ceiling” is the set of rates they are referring to. Not to worry – most of our clients pay far less than those rates, due to the various competitive discounts they receive.
Unfortunately, the carrier’s costs have continued to rise. As it turns out, they also have to buy insurance (“reinsurance”) to make sure they will not run out of money when a truly catastrophic event actually does happen. Repairs to damaged homes have to be done at current construction costs, (not at market or tax value) and liability claims (dog bites, etc.) have continued to climb.
The problem lies in the fact that these maximum rates have not been increased since 2008 (when they went up an average of 4.05 percent). Rather than continuing to pay out more than they take in, some carriers have either quit or severely drawn back from writing in the state of North Carolina until the maximum rates can be adjusted.
As an alternative to not offering a renewal policy, the carrier can offer a renewal with your signed consent to pay a market driven rate (“consent to rate”). Nearly 30% of inland NC policies are now written on this basis. Often, carriers are willing to write the homeowners coverages at a loss (without consent to rate) if they also write your auto coverage, which they consider to be adequately rated. If the premiums are still unbearable, one might consider a higher deductible.
The NC Department of Insurance has approved an increase in these maximum rates effective July 1, 2013. While the coverage increase is average seven percent, the increases vary by rating territory, and will be less in our area.
At the end of the day, the “consent to rate” program allows standard lines carriers to provide a necessary product at (believe it or not) a competitive rate.
AUTO INSURANCE POLICY
There are basically six different types of coverages. Some may be required by law. Others are optional. They are:
1. Bodily injury liability, for injuries the policyholder causes to someone else.
2. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car.
3. Property damage liability, for damage the policyholder causes to someone else’s property.
4. Collision, for damage to the policyholder’s car from a collision.
5. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
6. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
HOMEOWNERS INSURANCE POLICY
The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. This covers all perils except those specifically excluded in the policy.
Homeowners insurance also covers additional living expenses. Known as Loss of Use, this provision in the policy reimburses the policyholder for the extra cost of living elsewhere while the house is being restored after a disaster. The liability portion of the policy covers the homeowner for accidental injuries caused to third parties and/or their property, such as a guest slipping and falling down improperly maintained stairs. Coverage for flood and earthquake damage is excluded and must be purchased separately.
LONG-TERM CARE INSURANCE
Long-term care (LTC) insurance pays for services to help individuals who are unable to perform certain activities of daily living without assistance, or require supervision due to a cognitive impairment such as Alzheimer’s disease. LTC is available as individual insurance or through an employer-sponsored or association plan.
MEDICAL PAYMENTS INSURANCE
A coverage in which the insurer agrees to reimburse the insured and others up to a certain limit for medical or funeral expenses as a result of bodily injury or death by accident. Payments are without regard to fault.
Federal program for people 65 or older that pays part of the costs associated with hospitalization, surgery, doctors’ bills, home health care, and skilled-nursing care.
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
Check out the upcoming Antiques Appraisal Fair in Lewisville
This annual event is sponsored by "Friends of the Lewisville Library" from 9AM to PM on March 16 at the library.
There is a slight charge for the service, with a discount for members of the organization (which we highly recommend).
This will be a great chance to do something you may have been putting off for years.
And as always,please contact us if you have questions about the special limits on your existing coverage!