Monday, September 5, 2011

Will Hurricane Irene Have Any Effect On Insurance Rates

Hurricane AndrewImage via WikipediaWhile many people in the North East are cleaning up the mess that hurricane Irene left, many of them are wondering what this will do to the rates they pay on the homeowners insurance. In Florida we managed to avoid serious damage from the recent storm. By law, insurers can not hike rates because of financial issues caused by losses in other states.

Florida isn't the only state having trouble with hurricane insurance. Also North Carolina, New Jersey, and Connecticut
 are having troubles with their insurers leaving the state. Many of these states have formed state sponsored homeowners insurance companies to fill in the gaps of insurance companies failing to provide coverage to the states homeowners.

Many states with long coastlines like New Jersey and Connecticut are in the same shape as Florida. Connecticut has in common with Florida a large percentage of its population living in coastal areas. Florida has 79 percent of its population living on the coast while Connecticut has 65 percent of its people living on the coast.

Don Brown, former Florida State Representative and Senior Fellow at The Heartland Institute and former state legislator who was chairman of the House Insurance Committee and is a noted national insurance expert, said since Irene missed Florida and aimed its fury to the north, any impact on higher rates would be because of reinsurance.

“You might see some upward pressure on reinsurance,” Brown said. “It’s unlikely there would be any immediate impact. It would down the road.” 

Reinsurance: is insurance that is purchased by one insurance company from another for risk management, transferring risk from the insurer to the reinsurer. 

So National insurance companies will have to pay more to other insurance companies who help in sharing the risk. If there wasn't reinsurance, we would all have to pay a much larger insurance premium.

The bottom line is insurers are not going to eat the costs of higher reinsurance costs. Sooner or later they will pass the costs down to the consumer. The days of cheap homeowners insurance died the day hurricane Andrew hit Homestead and wiped it out.

Having proper homeowners coverage means you need check your policy to see if your under or over insured. Check your policy for coverage due to storm wind damage. Also check to see if you need flood insurance.

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