insurance

Dumped by home insurer after a disaster?

Flooded neighborhood
Highlights
  • After severe weather, insurers can face a flood of insurance claims.
  • If your policy is dropped, find a good multi-lines insurance agent.
  • Contact your state department of insurance to determine your options.

If you live in a state that suffers from severe weather such as tornadoes or hurricanes, finding good homeowners insurance is getting more difficult as weather patterns grow more extreme.

In the aftermath of weather-related catastrophes, insurers can face a flood of insurance claims and as a result of the expense eventually drop thousands of policies. For example, Alabama-based insurance company Alfa announced in June that it wouldn't renew 73,000 home policies after tornadoes battered the state in April. After Hurricane Katrina hit in 2005, insurance giant State Farm stopped writing new policies in Mississippi. And following more recent hurricanes, 20 percent of homes on the Alabama coast are going without any wind insurance due to staggering rate increases. The state's four largest insurance companies have canceled 50,000 policies in coastal Alabama, according to Carl Schneider, partner at Schneider Insurance and member of the Coastal Alabama Leadership Council, or CALC.

"Insurance is available, but in many cases it is now becoming extremely expensive and may be from a state provider such as Citizens (Property) Insurance (in Florida) or Texas Windstorm Insurance (Association), or from a lesser-known provider," says Paul Berger, an insurance attorney with the Hurricane Law Group in Coral Springs, Fla.

"Moreover, many traditional carriers will not write new policies anywhere in the state, and the only option are smaller regional carriers such as Tower Hill Insurance (Group) or Florida Peninsula Insurance," he says. "These smaller carriers tend to have minimal financial reserves and are at risk of bankruptcy should a major disaster impact their coverage area."

What can you do if your area is at risk of insurance cancellations? Here are a few tips to help prevent or deal with cancellation.

Make your home attractive to insurers. The most important thing a homeowner can do to prevent insurance cancellation is to "take steps to protect the home against the major natural hazard that is likely to impact that property, whether it is windstorms, severe winter weather, wildfire, earthquake, hurricane or hail risk," says Julie Rochman, president and CEO of the Insurance Institute for Business & Home Safety. "The better the risk, the more attractive a property is to insurers. This also means that proper maintenance and up-to-code plumbing, wiring and mechanical systems are important."

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By law, each insurance company makes their own individual decisions about how to evaluate the durability of each home it insures. "In general, they look at a home's ability to withstand the types of natural and manmade risks that are present where that home is located," Rochman says.

Write to your state legislators. While many states now offer state-backed insurance policies, that really isn't the ideal situation. "The reason state-backed carriers exist is because private carriers will not accept disaster risk in certain areas," Berger says. "As natural disasters become more costly, it is likely that many carriers will refuse to write insurance policies in disaster-prone areas, and state-backed or federally backed insurance may become the only option."

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