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Rebuilding after back to back to back hurricanes is expected to cost anywhere from $16 billion to $23 billion, but will have less impact on most homeowners' insurance policies than you might think.
Damage estimates from Hurricane Ivan range from $3 billion to $10 billion, rivaling the nearly $7 billion in damage Hurricane Charley brought to Florida last month, or the $6 billion caused by Frances three weeks later.
Nevertheless, Carolyn Gorman, a vice president of the Insurance Information Institute, expects homeowners insurance premiums to climb an average 2.8% in 2004, and she doesn't foresee much of an increase next year. That's only a fraction of the premium hikes homeowners have weathered during the past three years.
On average, the cost of homeowners insurance increased 7.4% across the U.S. in 2003, which followed a 13% jump in 2002 and a 7% climb in 2001, according to the Consumer Federation of America. Some states were much higher -- with average rates rising 57% in Texas and 33% in Iowa.
Insurers have lowered their risks in most hurricane-prone areas since Andrew's devastation in 1992, Gorman says. And most people in Florida now have high windstorm deductibles -- generally from 2% to 5% of their home's insurance value. That could mean shelling out up to $15,000 before even filing a claim for damage to a $300,000 house. (Uninsured property damage may be tax deductible.) Insurers have also stopped doing business in a lot of high-risk areas, leaving many homeowners with no choice but the state's high-risk pool. This is bad news for people whose houses were damaged or destroyed by the hurricanes, but means fewer premium increases for the rest of us.
Meanwhile, insurers have become more likely to drop customers after making just a few small claims -- another strategy they've used to increase their profitability. The rules for when and how to use your policy are totally different than they were just a few years ago.
Ways to save
Fortunately, there are some steps you can take to lower your insurance costs without compromising your coverage:
- Raise your deductible to at least $1,000. You'll lower your premiums and you'll be less likely to file small claims that could encourage your insurer to raise your rate or drop you when your policy comes up for renewal. Increasing your deductible from $250 to $1,000 could lower your premiums by about 25%.
Be sure to set aside money in your emergency fund to cover those potential out-of-pocket expenses. If you live in an area like Florida with high windstorm deductibles, you'll need to set aside a lot more money in emergency fund. - Ask an independent insurance agent who works with many companies to help you find a good deal - which is worthwhile only if your rates have risen significantly. Go to the independent insurance agents Web site to find an agent in your area.
But be careful. It's not a good idea to switch companies just to save a few dollars - you might lose a good customer discount you've built up with your current insurer and a claim within the first six months at a new company might lead your new insurer to drop you and you could wind up with a more expensive policy. - Be sure to overlap your policies if you are voluntarily switching insurers. Don't let go of the old policy until the end of the 60- to 90-day period when the insurer can drop you. Some insurance companies have been accepting customers, then dropping them within that time period after finding that the house has a history of major claims, especially ones related to water damage.
- Check out your CLUE report to make sure there aren't any errors. You can order these reports, which insurers use to share claims information with each other, for $12.95 at Choicetrust.com.
- Check the new insurer's reputation for customer service before you sign on the dotted line. This becomes particularly important after major disasters like hurricanes. A quick review of the company's customer-complaint record will save you time and major headaches later (you can use the same resources to check up on an auto insurance company, too).
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