insurance

Homeowners insurance: Don't go bare

Don't forget to factor in living expenses if your property is so damaged you're forced to find other accommodations -- at least for the short-term.

Once you compare these costs to your premium and deductibles, you might find that your policy wasn't as expensive as you thought.

4. Can I afford to buy a basic hazard policy? This is the coverage that protects you in the case of run-of-the-mill losses, such as fire, burglary or broken pipes. These you face 365 days a year, not just during a special season. Talk to your agent about purchasing at least this type of coverage.

5. What happens to my liability coverage if I cancel my homeowners policy? You lose it. That's not a good idea. While you might not face a hurricane or tornado this year or next, you could face a costly situation if a delivery person slips dropping that package on your front porch. Talk to your insurance agent about getting a separate liability rider or including the coverage in that basic hazard coverage you're going to buy.

Unexpected problems the uninsured face

You also need to consider what going without homeowners insurance might mean in other areas of your life.

"There are a couple of factors that come into play," says Timothy Perr, managing principal of the consulting firm Perr&Knight. "One is what happens if you drop prior insurance coverage and then try to get back into the market."

Perr says that insurers generally see you as a worse risk. In such a case, even if you can get insurance, you're likely to pay more for it.

"A lot of companies won't write you if you have dropped your homeowners insurance," says Perr. They might see it as an indication that you couldn't afford it in the past and therefore might have problems meeting premium payments now.

Or companies might suspect that you're trying to get insurance now because you know you have an imminent claim coming.

Your credit also could be affected. If you have no insurance and aren't prepared to cover any post-storm costs yourself, your credit likely will take a hit. And that will reverberate throughout your entire financial life, not just insurance.

Higher costs blowing in the wind

It's easy to understand why insurance costs have risen so dramatically for homeowners in Gulf Coast states.

According to the Insurance Information Institute, seven of the 10 most expensive hurricanes in U.S. history struck between August 2004 and October 2005. During those months, Katrina, Rita, Wilma, Charley, Ivan, Frances and Jeanne produced a total of more than $77 billion in damages.

But the insurance effects of those storms are being felt nationwide.

"Windstorm coverage has become a real issue," Yates says. "Allstate, for example, has retreated quite dramatically."

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In New York, that insurer is no longer writing new policies from Westchester County to Montauk Point (on Long Island), he says. Other companies are renewing existing policies, but not adding new clients, depending on attrition to whittle down their exposure.

The reason: Lloyd's America told insurance companies gathered for the Northeast Hurricane Conference in July that if a storm hits New York state, it could result in insured losses of $65 billion.

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