- 1 Why most of Harvey Insurance Claims Will Likely Be Denied - KVOA | KVOA.com | Tucson, Arizona
- 2 The Following Guidelines Will Help You With Your Home Owner’s Insurance
- 3 Homeowners Insurance: Higher Deductibles Lower Premiums, But Can You Afford to Take the Risk?
- 4 US can help homeowners, manage risk: HUD secretary
Why most of Harvey Insurance Claims Will Likely Be Denied - KVOA | KVOA.com | Tucson, Arizona
First water, then red ink: The nightmare of Hurricane Harvey’s deluge of Houston could be exacerbated by the cost of recovery.
Experts say the unique nature of Harvey’s devastation means affected residents — and FEMA’s already-broke flood insurance plan — will be the ones reaching into their pockets to rebuild.
The early figures are fluid and likely to change, probably increasing as the extent of the damage becomes more clear. And early estimates of aggregate losses already vary widely, depending on whether the figure includes insured and uninsured property damage, or indirect impacts like lost worker productivity and economic output.
Texas Gov. Greg Abbott said Wednesday his state could need upwards of $125 billion from the federal government to help it recover.
A preliminary analysis by catastrophe-modeling firm RMS estimates that wind, storm surge, and flood damage could collectively total between $70 billion and $90 billion. Moody’s Analytics put the estimate this week at between $45 billion and $65 billion in damages to homes, businesses and public infrastructure, according to chief economist Mark Zandi. “I9rsquo;m sure that’s going to go higher, but that’s our current estimate,” he said, adding that this figure does not include up to an additional $10 billion in lost economic output.
For residents of Houston and other waterlogged communities, the more pressing questions pertain to insurance: What’s covered, and who is responsible for those losses.
The state’s big insurers have been going into action. State Farm tweeted on Monday it was adding “hundreds of staff” to help customers file claims, and Allstate tweeted on Wednesday “We're moving into the areas affected by Harvey, ready to help start the recovery process."
Collectively, the two insurers have more than one-third of the homeowners insurance market share in Texas, according to Morgan Stanley.
But this might not hurt these insurers as much as might be expected — and individuals could find themselves with far less coverage than they expected. While most comprehensive car insurance policies cover flood damage, as a rule, homeowners’ policies don’t cover water damage resulting from floods; if wind shears off a roof and rain pours in, that damage is typically covered, but overflowing rivers or reservoirs or storm surges are not.
And those waters are responsible for the lion’s share of Harvey’s devastation. “Harvey is primarily a flooding event,” said Robert Hartwig, clinical associate professor of finance at the University of South Carolina and consultant to the Insurance Information Institute.
A small percentage of flood policies for homeowners are through private-sector insurance providers, but most are written through the National Flood Insurance Program, which subsidizes premiums paid by homeowners and businesses.
“Longer run, the program’s rates need to more truly reflect the actual risk that’s being assumed,” Hartwig said. But raising premiums, as well as other tactics, like redrawing flood plain maps or implementing more restrictive zoning to limit the number of vulnerable properties, inevitably face pushback from real estate and construction interests, along with local officials who want to add, not subtract, taxpaying home and business owners in their districts.
Since only homes with federally backed mortgages in FEMA-designated Special Flood Hazard Areas are required to carry insurance, a lot of Houston homeowners in low-lying neighborhoods are likely to find themselves without any financial safety net at all.
Real estate analytics company CoreLogic found that less than half of the homes and businesses at moderate-to-high flood risk in the Houston metro area are within an SFHA. Harvey’s waters spilled out over those boundaries many times over. Risk analysts estimate that only between 15 and 20 percent of homes in the Houston area were covered by flood insurance when Harvey inundated entire neighborhoods with water, which means much of the individual losses will be borne directly by homeowners.
New Storm Norm Has Led to $25 Billion Debt for Flood Program
Even as development has pushed further into low-lying areas, the nature of major storms has changed. “Many of the most severe events in recent years have tended to be very wet, with heavy rain and storm surge being the defining characteristics. This looks like the new norm,” Hartwig said. “It9rsquo;s the principal reason why the NFIP is $25 billion in debt today.”
The beleaguered NFIP has two important deadlines coming up, and the impact of Harvey is likely to weigh on how lawmakers respond.
Its most recent five-year reauthorization is set to expire on Sept. 30. Congress can reauthorize it or extend the current reauthorization; although members of both parties have talked about the need to overhaul the money-losing program for years, political hurdles abound.
According to RMS, some half a million NFIP policies ultimately will be affected by Harvey. “Losses to the program will be very significant — potentially the largest event to date,” the company said. The program has a $30.4 billion borrowing limit from the U.S. Treasury; access to additional funds requires authorization by Congress.
Steve Ellis, vice president at Taxpayer for Common Sense, said it’s likely that claims related to Harvey could easily top the difference between that figure and the program’s existing $24.6 billion debt, forcing an already dysfunctional Congress to confront a political quagmire.
“The borrowing limit issue is something that will be part of the discussion. It’s really hard to argue that everything is fine in the program,” Ellis said. Adding Harvey to a list of budget-busting storms that include Katrina and Sandy — an average of one every four years — makes it harder to call these weather events outliers, he added.
“The federal government cannot afford to pay subsidized insurance year after year and not incorporate those changes into their statistical databases,” said Jim Blackburn, co-director of the severe storm center at Rice University, who says lawmakers need to be persuaded to come to grips with changing weather patterns, for economic, if not environmental, reasons.
“We9rsquo;re looking at a different reality as far as rainfall events in Houston,” Blackburn said. “This storm just blows any concept of the 100-year floodplain away… if FEMA doesn’t get a handle on a reasonable 100-year floodplain, then that whole program is absolutely doomed.”
The Following Guidelines Will Help You With Your Home Owner’s Insurance
Part of buying a house is finding a good home owner’s insurance policy. The coverage and amount you need can vary by location. Continue reading to learn some vital items on making the best choice when it comes to homeowner’s insurance.
If you have a child in college, check with your insurance agent about whether the child’s residence requires a separate insurance policy. Nearly all policies will cover belongings stored in a dorm room, while the regulations about off-campus apartment living will vary widely from policy to policy, even within the same company.
When considering insurance for your home, take into account the building materials that are in the home you wish to insure as well as any possible additions. Insurance companies will most likely grant greater rates for safer construction materials such as steel and cement as opposed to flammable wood. Be sure to compare rates with multiple companies also.
Look for ways to save on your policy. When doing repairs or remodeling your home, look into how the building materials will affect the cost of your premiums. Cheaper materials may end up costing you more in the end.
When you are going to purchase homeowners insurance there are certain things that you should look for in a policy. A good thing to have is guaranteed replacement value insurance. This means that no matter the cost your home will be rebuilt if a disaster were to happen. Most people think this is automatic, however, since home values increased it probably would cost more now than what you had originally paid for the home. This way you are covered.
If your home is damaged severely with water, do not dispose of any destroyed property before your insurance adjuster can assess the damage. You can remove destroyed items from the home so that they do not cause further water damage to floors or other items, but leave them on the property. Failure to do so means you may not be compensated for those items.
If you have home insurance and also have a dog, make sure that you look for policy options that cover people who may be attacked by your dog. It’s a strange and backwards world sometimes, but an intruder can actually sue you if your dog attacks him. Yeah, it’s crazy, but that’s why they have these coverage options.
Stay vigilant over the cost of your home insurance premiums by doing an annual check of your policy statements, and seek quotes from other companies to ensure you are paying the lowest rates. Your insurance doesn’t always automatically reflect changes that can lower your rates, so you want to make sure any discounts for adding alarms, sprinkler systems or removing a swimming pool are applied. Staying vigilant is the best way to save money!
You should consider the increase in home insurance that you will face if you invest in a swimming pool or trampoline for your property. These items are deemed risky and will likely raise the cost of your premiums by roughly ten percent or even more for the year.
The home you have just bought is probably the largest investment in your life. It is a natural instinct to protect the value of your property. The way to do that is to purchase a home owner insurance policy, which is basically landlord home insurance a contract between an insurance company and the home owner. As long as the home owner keeps paying the monthly premiums, the insurance company pays for certain losses such as damage caused by human actions or natural disasters.
Keep one or two fire extinguishers in the kitchen and around the house. Depending on your home owner’s insurance provider, having functioning fire extinguishers handy might lower your rates. It is also great to have one handy in the event of a fire. They could end up saving your life.
To save money on your home owner’s insurance policy, make sure that your home contains fire alarms and a fire extinguisher. These inexpensive pieces of equipment can not only save your life, but may save you up to 10% per year on your insurance premium. Talk with your insurance company to find out how much you can save on your policy and how many alarms you need to install.
If you are satisfied with your home insurance company, try and get greater savings out of them with a multiple policy discount! Many times a company will offer a significant discount as an incentive for taking out more than one policy with them so look into coverage for your car or health with the same company and quite possibly save on two or more annual policy premiums!
There is no way to get insurance coverage for landlord insurance unpaid rent your home without spending money. There are lots of ways, though, to get coverage for less or to get better coverage for the money you spend. This article’s tips are just scratching the surface; learning more about home owner’s insurance can lead to even better deals If you beloved this posting and you would like to get extra information with regards to Compare landlords Insurance kindly visi
Homeowners Insurance: Higher Deductibles Lower Premiums, But Can You Afford to Take the Risk?
Raising the deductible on your home insurance policy is one proven way to save money on your premiums, but it’s not the best financial decision for every homeowner.
Before you reach for the phone to bump up your deductible there are two important factors to consider: Do you have enough money saved to cover higher out-of-pocket claim costs, and have you discussed potential savings and ramifications with an insurance agent?
“The bottom line is that you want to make sure you are comfortable with the deductible amount you’ve selected,” says Stacy Molinari, personal lines and claims manager of Insurance Marketing Agencies, Inc. “And that means you need to make sure you have enough of a financial cushion to cover the deductible. Otherwise it could cost you more in the long run.”
So, just how much savings are out there when switching to a higher deductible? Let’s break it down by looking at a report commissioned by insuranceQuotes.com.
The 2016 Quadrant Information Services study examined the average economic impact of increasing a home insurance deductible (i.e. how much you pay out of pocket for a claim before your insurance coverage kicks in). Using a hypothetical two-story, single-family home covered for $140,000, the study looked at how much an annual U.S. home insurance premium can decrease after increasing the deductible.
According to the National Association of Insurance Commissioners (NAIC), the average home insurance premiums is $1,034, and the study examined three different percentage increases and their respective premium savings:
- Increase from $500 to $1,000: 7 percent savings.
- Increase from $500 to $2,000: 16 percent savings.
- Increase from $500 to $5,000: 28 percent savings.
What makes home insurance deductibles so significant?
In short, a home insurance deducible is one of many gauges an insurance company uses to determine how much risk the consumer is willing to accept. A higher deductible means more risk being taken on by the homeowner, and that additional risk makes it cheaper to insure the policyholder.
“A higher deductible is a signal to the insurance company that the homeowner is less likely to file claims because they are agreeing to a higher threshold for doing so,” says David Reiss, law professor and research director at Brooklyn Law School’s Center for Urban Business Entrepreneurship. “And the less likely you are to make a claim, the lower your premium is going to be.”
In other words, deductibles either encourage or discourage the filing of claims. If, for example, someone has a $500 deductible, he or she is more likely to file a claim than someone with a $5,000 deductible.
“Insurance companies don’t make money when they are paying out a lot of small claims at $500 or $1,000,” says Jonathan Stein, a California-based consumer law attorney who specializes in insurance. "So increased deductibles mean a decrease in the number of claims, and the insurance company saves more money.”
How much you save on insurance premiums varies by state
When it comes to insurance no two states are created equal, and this means the savings you’ll see from increasing your home insurance deductible will depend on where you live.
For instance, North Carolina residents save, on average, 39 percent when increasing a deductible from $500 to $2,000. And when increasing from $500 to $5,000 they save an average of 45 percent on home insurance (the most significant difference in the country). In fact, North Carolina had the highest percentage savings from deductible increases in all three categories.
Meanwhile, Rhode Island residents see the second-highest savings when increasing home deductibles to $1,000 or $2,000 (14 and 27 percent respectively), and homeowners in Oklahoma see the second-highest savings when increasing their deductibles to $5,000 (40 percent).
Conversely, residents of Texas and Wyoming save, on average, less than 3 percent by increasing their deductibles to $1,000, and homeowners in Texas, Hawaii and Indiana will, on average, save less than 7 percent on their home insurance premiums by increasing a deductible to $2,000.
Industry experts and analysts say the reasons for these state-by-state differences are complex.
Mike Barry, spokesman for the nonprofit Insurance Information Institute, says it's important to point out that many states with the most significant savings are those that also have a very high risk for natural disasters, such as hurricanes and tornadoes.
"If you're living in a state with a significant number of natural disasters and you, as a policyholder, are willing to absorb more of the risk with a higher deductible, your insurer is going to give you a more substantial break in your premium," Barry says.
To that end, any potential savings will depend on the state you call home.
“If there’s no significant savings to be had in your state, it doesn’t make sense to increase your deductible,” Stein says. “But if you can save the increased deductible amount — $500 for example — in less than five years, then it makes sense, especially if you don’t plan on moving.”
Are you financially prepared to increase your deductible?
Sure, an increased deductible may shave money off your annual premium, but that means nothing if you don’t have enough cash to cover it in the event of a loss.
“The financial plan is simple: Be certain you can pay the deductible amount if you have to,” says Josh Hite, owner of the Florida-based Brightway Insurance Agency. “The insurance company isn’t going to look at your bank records to make sure you have enough money tucked away. It’s up to you to make sure you can cover the expense if you file a claim.”
Molinari says it’s important to understand that a deductible is not a sum of money collected by insurers. Rather, in the event of a loss, an insurance company will pay the amount of the covered loss minus the deductible.
“This is important because even though you’re not writing a check for your deductible amount you must have enough money saved to cover the additional expense,” Molinari says. “If you don’t, you might have to put off making certain repairs, which can cause you to incur additional expenses if your home isn’t livable.”
Even if you’re financially prepared to put away enough money to cover your deductible, Stein says homeowners still need to consider whether an increased deductible will result in substantial savings — and this requires some simple math.
For example, if you increase your deductible from $500 to $1,000 but only save $10 per year, then you need 50 years of insurance to save the extra $500. If, however, a $500 increase saves you $200 per year, then you are saving money within two-and-a-half years.
“Homeowners need to do this math to figure out if the savings are worth the increased burden of a higher deductible,” Stein says.
Talk to an insurance agent about changing your deductible
No one knows the nuances of your home insurance policy better than your agent, so before making any decisions about your deductible you need to get his or her advice.
For instance, Molinari says she always begins the deductible conversation by finding out what a client’s risk tolerance is.
“I like to ask my clients, ‘How big would a loss have to be for you to file a claim?’ The answer to that question usually helps both the client and myself with selecting a deductible,” Molinari says. “Often times I find that clients are paying for a $500 or $1000 deductible but they would never consider filing a claim for $1000.
These clients should not pay for a benefit they would never use.”
Also, talking to your insurance agent may alert you to deductible options you may have never considered. For instance, some carriers will offer something called a large loss deductible waiver. This is typically an inexpensive endorsement or comes built into some home insurance policies.
For example, a policy may have a large loss deductible waiver if the claim exceeds $50,000 as long as the homeowner elected to have a deductible less than $50,000. So if the homeowner has a $25,000 deductible and a $50,000 loss, they don’t pay a deductible at all.
“This is a great option on high value home policies and for those who can take the hit of a larger deductible,” Molinari says.
Finally, make sure you are regularly reviewing your policy with your agent and doing a market comparison every three years to make sure your current insurer is still the right one for you.
“Appetites, markets and rates change, and your agent should always be aware of this,” Molinari says. “Changing your deductible isn’t the only way to reduce your insurance costs.”
US can help homeowners, manage risk: HUD secretary
The government can bring more Americans into the housing market while managing risks that contributed to the country's housing and financial crisis, the secretary of Housing and Urban Development told CNBC.
The Federal Housing Administration lowered its insurance premiums by half a percentage point on Monday. The move follows Fannie Mae's decision to back loans for which borrowers have made low 3 percent down payments.
While the new FHA policy lowers a financial hurdle for first-time homebuyers, the government has also introduced a series of safeguards, Julian Castro told "Squawk Box" on Monday. Those include a credit score floor of 500 and a mandatory 10 percent down payment for borrowers with suboptimal credit scores.
"These safeguards that are in place are making sure that we don't slide back to where we were when the housing crisis came upon us," he said. "At the same time we also don't want to be at the other extreme, where nobody can get credit."
He further noted that the announcement today is not about who qualifies for a home loan, but making loans more affordable for those who would have qualified prior to the change in policy.
Under the new policy, the average homeowner with a $200,000 loan can expect to save $84 a month. Asked whether that is enough to get first-time homebuyers off the fence, he said it helps and that it is part of a confluence of currents, including low mortgage rates and gas prices and moderating home prices.