Sunday, 26 June 2016

Homeowners Insurance Costs Increasing

Insurance Costs Increasing

Homeowners Insurance Costs Increasing
The average cost to insure homes in Michigan is expected to rise 10 to 30 percent this year. The extraordinary number and severity of catastrophes, a downturn in the investment market, sharply rising home and repair costs and the emergence of mold claims are all contributing to the higher insurance rates today, according to an insurance industry representative.

"Homeowners insurance premiums are increasing throughout the country," Insurance Information Association of Michigan (IIAM) Executive Director Leanne Snay said. "In Michigan, even though rates are rising, homeowners insurance is still a good buy."

Historically, Michigan's homeowners insurance premiums have remained well below the national average. According to a 1999 study by the National Association of Insurance Commissioners (NAIC), Michigan's average homeowners premium of $417 ranked 30th in the nation. The average homeowner premium during that same year was $487.

Rates Rising

Homeowners rates are rising, however, due to a number of factors, such as an increase in the number and severity of catastrophes. Over the past 12 years, insurance companies have paid out more than $100 billion in catastrophe-related losses, many times more than in previous decades. Catastrophes include well-known events, such as Hurricane Andrew and the Northridge Earthquake, as well as hundreds of smaller disasters like tornadoes, wildfires, hail, ice and snow.

Michigan had its share of catastrophes in recent years. In 2001, 32 tornadoes, well above the average of 18, caused $49 million in damages here. According to the Insurance Services Office, a thunderstorm-related event in July of 2000 resulted in $40 million in insured losses. In 1999, several severe weather incidents generated claims of at least $375 million. And, violent thunderstorms of May-June 1998 caused at least $115 million in insured losses.

Buildling a Home

Homeowners Insurance Costs IncreasingThe cost of home construction and repairs is also rising. According to the National Association of Home Builders, the cost of rebuilding a home has risen about 3 percent a year on average during the last decade. National statistics show that between 1998-2001, the cost of home repairs increased on average by more than 6 percent per year, two times faster than the overall average rate of inflation during that period.

In the 1990s, insurance companies were able to offset increasing claims costs through investments. More recently, however, the sagging economy and fall in investment return has taken a toll on insurance company efforts to hold down rate increases.

Mold has emerged as another factor in home insurance premiums. Mold is nothing new, but there has been a sharp increase in the number of mold claims recently. Mold claims cost insurance companies more than $1 billion in 2001, five times the cost in 2000.

Factors affecting rates

The amount a consumer pays for homeowners insurance is affected by many other factors like the type of construction, age of the home and quality of local fire protection services. By shopping around and taking some simple steps, consumers can take advantage of the competitive marketplace and possibly save some money. IIAM officials suggest consumers consider the following:
  • Take advantage of discounts offered by your insurance company. Discounts may be offered for installing smoke detectors and dead-bolt locks, insuring both your home and auto with the same company, maintaining good credit and living in a nonsmoking household.
  • Raise your deductible. Covering small losses could mean a substantial reduction in your homeowners insurance premium. Higher deductibles could produce a savings of 15 to 30 percent.
  • Always shop for the best combination of coverage, price and service.