Insurelane Insurance Blog

A woman, Latisha Francis, in Murfreesboro, Arkansas was in shock when she arrived home to find a cow looking at her from her front door. Three cows had waltzed into her home one day after being spooked by her dogs. The cows left the house in shambles by ruining furniture, leaving manure and making a mess throughout the entire household.

According to the Dallas News, the county sheriff and two high school teachers had to help remove the cows from the house. The cow who was already peaking out of the front door left with little hesitation. But another of the cows had to be pulled out of the house on a rug from the master bedroom and the final bovine needed to be led out of the living room.

Unfortunately for Latisha Francis, the homeowners insurance policy she has does not cover intruding cows. The damage caused by the cows will have to be covered out-of-pocket.

Intruding cows is a highly unlikely and unforeseen event. However, it may be more affordable for Latisha to pay for the ruined furniture and clean the mess herself. Her homeowners insurance premiums could have been raised if her insurance policy would have covered the claim, which would result in higher insurance costs every month.

Many homeowners can keep low premiums by avoiding small claims and making adjustments to households on their own.

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After the recent devastation in Haiti, many are wondering if Americans have the insurance protection they need in case of an earthquake.

Although some believe that an earthquake is the last natural disaster to cause catastrophe in their area, earthquakes can occur anywhere there are folding faults. According to the College of Charleston, South Carolina was hit by an earthquake that ranged from 6.9 to 7.3 on the Richter scale in 1986, which is as large as the earthquake that just hit Haiti last week. Proving that earthquakes can happen all over the United States and not just in California.

California is one state where earthquakes are viewed as a regular occurrence and causes little apprehension to most residents. Yet only 12 percent of Californians have earthquake insurance in addition to their homeowners policy. Earthquake insurance acts like flood insurance and is not covered by a homeowners policy but can be purchased in addition.

Residents can obtain quake insurance through the California Earthquake Authority (CEA) which is a state-sponsored program that sells the insurance through commercial insurance companies. The San Francisco Gate says that the CEA handles 70 percent of quake insurance policies and that the CEA publicly admits that even with the additional insurance, homeowners could experience “substantial uninsured loss” from an earthquake.

Why are Californians not purchasing or dropping their quake polices?

Residents with a current policy from the CEA pay an average premium of $707. This is quite expensive for the poor economic times and when people think there is little return in the investment. Even with the policy, people may not be qualified for returns if damage does not exceed 15 percent on the home’s value.

Compared to Hurricane Katrina, which paid around 53 percent of losses to residents and businesses; after a major earthquake in California, residents would only receive 6 to 10 percent of losses and businesses would see 15 to 20 percent. Making it hard for Californians to justify the expensive premiums and little return.

The CEA has realized the problems with its policies and is currently trying to pass legislation to decrease premiums and make the earthquake insurance more accessible and affordable.

The measures that are being taken by the CEA are critical to spreading coverage across the state. In many cases, people in neighborhoods without the insurance, cannot afford to repair the damage often leaving their homes in shambles. The vacancy of homes in a neighborhood increases other homeowner’s premiums in addition to making the neighborhood less attractive to potential buyers complicating many matters in purchasing a home in California.

Earthquake insurance coverage needs to be extended to more California property owners. No homeowner is exempt from possible disaster and should have considerable homeowner insurance policies to cover unforeseen events.

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The Federal Emergency Management Agency (FEMA) now ranks and rates areas around the U.S. with the highest flood risk.

The high-risk list included cities such as Los Angeles, Chicago, Washington D.C., and Denver.

In Colorado, FEMA and state engineers are working on five-year project to create a flood map of the whole state, reported the Rocky Mountain News.

“People need to know whether they are in a flood plain. They also need to see the nearest place where they could evacuate and where the nearest high ground is, in case streets are flooded,“ said Nancy Steinberger, a FEMA engineer mapping flood plains in Colorado.

In places FEMA determines a high flood risk in Colorado and the rest of the country, residents may be required to get mandatory flood insurance. And that coverage can be very expensive.

Some areas are found by FEMA to be so high risk, they could be denied coverage altogether.

But many are questioning the accuracy of FEMA’s flood maps, reported USA Today. One lawsuit in Washington D.C. resulted in FEMA withdrawing a flood zone expansion into the downtown area.

Lawyers cited FEMA’s maps as “arbitrary and capricious,” reported the Washington Post.

Still, the risk of flood is high in many places — and it’s important for homeowners to understand most homeowners insurance policies don’t cover flood damage.

“Moving out of the flood plain is one of the best things anybody can do,” said U.S. Army Corps Engineers spokesperson, Ron Fournier.

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UPDATE: The Senate rejected the bill to include wind insurance coverage in a vote of 73 to 19.

In the beginning of this year, the National Flood Insurance Program was reauthorized by the U.S. Senate.

The flood program was created in 1968, and lets home and business owners buy flood coverage from the federal government if they are in areas with high flood risk.

Now, lawmakers are considering adding insurance coverage for wind damage as an amendment to the 40-year old flood program.

“Catastrophic coverage in the event of a hurricane should be seamless. Property owners shouldn’t have to go to court to fight over whether it was wind or water that destroyed their home or business,” said U.S. Senator Roger Wicker.

Private insurance companies voiced concerns that adding wind insurance would mean competition from the federal government. The chairman of the Senate Banking, Housing and Urban Affairs Committee, Senators Christopher Dodd and Richard Shelby agreed.

The White House has also indicated that the amendment would be vetoed.

But the amendment — already approved by the U.S. House of Representatives — is schedule to soon go the Senate floor for a vote.

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This week, over 870 homes were destroyed or damaged by flooding in the north central region of Indiana. The floods were caused by heavy rains and overflowing rivers, reported the Indianapolis Star.

Five counties are now being considered disaster areas by the state — including Cass, Jasper, Newton, White, and Pulaski.

Indiana Governor Mitch Daniels is expected to ask for assistance from the Federal Emergency Management Agency (FEMA). Governor Daniels hope FEMA will also provide federally backed low-interest loans to help residents rebuild their homes.

Now the Indiana Insurance Department is expected to issue a warning to residents of more floods to come. Officials expect this spring season will bring a higher risk of flooding. They also advise residents get flood insurance.

Flood damage is not typically covered in a homeowners insurance policy. So homeowners have to buy flood insurance separately.

It’s expected that Indiana residents will experience flooding — especially near rivers that are at risk of filling up over flood stage.

“If you are in special flood hazard area, it’s not a matter of if it’s going to happen, it’s when,” said Wayne Capek, president of Flood Insurance Solutions of Brownsburg.

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The wildfires in Southern California destroyed thousands of houses and many residents are just starting to rebuild their homes. For some homeowners, insurance companies are offering programs where they can use eco-friendly building materials to make their new houses greener.

Fireman’s Fund on the West Coast and Lexington Insurance Co. on the East Coast are two of the insurers who have started green rebuilding programs.

These programs allow homeowners to rebuild houses using more efficient plumbing, environmentally-safe materials, and wood that’s forest stewardship certified. All of these additions can be made even if they cost more than the value on the insurance policy, reported the Houston Chronicle.

“We’re seizing on what we see as a significantly growing green movement.” said David Valzania, Lexington Insurance Co.’s vice president of personal lines.

Fireman’s Fund is also starting a program to upgrade homes — with more efficient heating and cooling systems, eco-friendly flooring, and paints and carpet with fewer harmful chemicals.

“[Y]our electric bill is a big cost, your water bill is a huge cost. [Going green is] a huge savings down the road,” said one Fireman’s policyholder.

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The wildfires that have forced hundreds of thousands of people out of their homes in southern California are finally being contained in the Los Angeles area, reported the New York Times. Eighty-five percent of the fires in Los Angeles County have been mostly controlled by the hard work of the state’s firefighters, said the article.

The National Weather Service will soon be able to remove the wind advisory because the strong Santa Ana winds have calmed. Fires, however, continue to be uncontained in San Diego County.

The insurance losses will be large, and claims will be sure to pour in. In response, the California Insurance Department has set up assistance centers, where policyholders can ask questions or report problems with their coverage.

“The Department of Insurance has offered to support local officials at their ‘one-stop-shop’ disaster assistance centers, in addition to the facilities coordinated by the Governor’s Office of Emergency Services,” said Insurance Commissioner Steve Poizner.

In San Diego, experts have estimated more than $1 billion worth of damage has been done to homes alone. But Tully Lehman, insurance industry spokesperson for the Insurance Information Network of California, said it’s too soon to predict total loss.

“At this point in time, most people are trying to figure out how many homes have been destroyed and have no idea how big [the disaster] is.”

For any residents with questions about their policy, they can call the Department of Insurance hotline at 800-927-HELP (4357), provided by the Insurance Journal.

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California Governor Arnold Schwarzenegger signed a bill into law last week to increase funding for the California Earthquake Authority (CEA). The CEA provides earthquake insurance through participating private companies. The main provision of the bill requires the participating insurers to contribute $1.3 billion into a statewide pool as a financial backstop in the event of a major earthquake.

The bill, written by state Senator Mike Machado, was the best compromise that could be worked out with the insurance companies, reported the Associated Press and the San Francisco Gate.

Previously, insurance companies were required to contribute $2.2 billion. But that commitment may have driven companies out of the state explained Senator Machado. He also said that without the compromise of $1.3 billion, policyholders with CEA earthquake coverage may have had rates increase by 20%.

The CEA now has around $2.7 billion in cash reserves, including the funding from the insurance companies and other sources.

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The U.S. House of Representatives passed legislation last week to expand the National Flood Insurance Program (NFIP), which provides homeowners with affordable coverage in high flood-risk areas.

The bill would increase the NFIP’s borrowing capabilities to $21.5 billion from $20.8 billion last year. It would also phase out around 450,000 government subsidies given for vacation homes, second homes, and commercial property built prior to 1974 — saving roughly $335 million a year, according to the Associated Press.

The Federal Emergency Management Agency (FEMA) would be able to increase rates based upon risk under the new bill — but they also must update all of the nation’s flood maps.

White House officials have recommended the President veto the measure because it includes insurance coverage for windstorm damage. Currently any damage caused by wind is the homeowners' responsibility.

The White House contends the wind damage provision would be “fiscally irresponsible” and that it would “shift liabilities for windstorm damage from the private sector to the federal government.”

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More and more homeowners along the Atlantic and Gulf coasts are having trouble finding insurance coverage. They’re paying larger premiums — often to more than double of what homeowners used to pay. But new legislation is in the works to help lower homeowners rates in hurricane-prone areas.

U.S. Representatives Tim Mahoney and Ron Klein are working on a bill that would start a national catastrophe program to give a federal backstop for private insurers. The idea behind the measure is to create private/public partnership which would share risk between insurance companies and the local, state, and Federal governments.

The “shared risk” could increase coverage for many coastal residents and help reduce homeowners insurance premiums to more affordable rates.

Mahoney, who is in the Financial Services Committee, hopes to refine the bill and introduce it to the floor before Congress goes to summer recess in August.

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Now that the 2007 hurricane season has arrived, many officials and experts in the insurance industry recommend homeowners check to see if they have enough coverage.

Experts are concerned people are misinformed about what their homeowners insurance policy covers. Research by the National Association of Insurance Commissioners (NAIC) confirmed their worries.

The recent survey found many people incorrectly believe certain damage is covered by homeowners insurance, in particular flood damage. 33% of Americans who are the heads of household think flood damage is covered by a standard policy. In fact, most homeowners policies won’t cover it at all — additional flood coverage is required.

“Many homeowners learned the hard way that their insurance policies did not provide flood protection,” said New Hampshire Insurance Commissioner, Roger Sevigny.

In addition to flood damage, standard homeowners insurance also will not cover stolen or damaged vehicles on the property, breaks in the water line or sewer line, earthquake damage, mold damage, or damage from termites or other infestations. But more than a third of homeowners think these damages are covered.

“Homeowners could be seriously harmed financially by misunderstandings about their insurance,” added Sevigny. “It’s critical that consumers look closely at their policies and ask their insurance agents detailed questions to become fully aware of what is, and what is not, covered.“

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The South Carolina House of Representatives approved a bill to give insurance companies an incentive to stay in the state while reducing premiums.

This measure would provide sales and income tax breaks for residents who improve their home’s structure to better withstand tropical storms — including storm shutters and other hurricane-resistant home improvements.

Residents will also be able to apply for government grants — up to $5,000 — to help pay for the improvements. And insurers would be required to reward policyholders who make storm-resistant upgrades with substantial discounts, reported the Associated Press.

The bill would also create hurricane savings accounts allowing homeowners to save tax-deductible money to help with insurance deductibles. It mirrors the popular Health Savings Account, where people can save tax-free money for their healthcare costs.

Governor Mark Sanford supports the bill and added tax incentives for the insurance companies, as well. Tax credits would be given to insurers who write full coverage policies for homeowners on the coast. To receive credits, cancellation notices must also be issued 60 days prior to the policy end date, rather than 30 days.

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Louisiana Governor Kathleen Blanco has been hard at work trying to solve her state’s insurance rate problems. The Gulf state’s homeowners insurance premiums are at all-time highs with the hurricane season just around the corner.

Her newest proposal hopes to make the insurance market more attractive for companies, bringing more insurers back into the state — ultimately utilizing competition as a means for reducing premiums.

The plan would budget $100 million state dollars to be used as re-insurance for insurance companies who apply. Companies accepted would be granted $2 to $10 million as an extra backstop in the event of a hurricane. Any insurer that has more than $25 million in assets may apply.

“Bringing more companies into the Louisiana market is our goal,” said Governor Blanco.

Accepted insurers would have to match the state’s amount and 25% of their new policyholders must be high-risk homeowners — those who are currently insured by the state-run insurer-of-last-resort, Louisiana Citizens Property Insurance.

They are also required to insure the high-risk members for at least 5 years, as reported by Associated Press.

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For months, South Carolina lawmakers have been working on a bill to provide tax incentives for residents to build stronger houses on the coastline. The bill will also extend homeowners policies to higher-risk coastal areas.

Tax credits would be given for the materials and supplies needed to strengthen a house, and insurers would be required to lower rates for people who complete improvements that give their home more protection from storms.

The bill was recently approved by a House subcommittee. It will now be reviewed by the Labor, Commerce, and Industry Committee, then go to the Senate.

Proponents of the measure are optimistic about its success, because the key players affected by the law have a generally favorable view of it.

“Everybody’s been involved, and I think it’s a good step,” said Republican Representative Harry Cato.

The law is aimed at South Carolina residents who live in their coastal homes all year long, and does not include people who own vacation homes.

“We’ve tried to protect the man that lives on the beach or close to the beach,” said Republican Representative Bob Leach.

The measure will also require a hearing every year to assess the status of the state’s wind pool — including a discussion on rates and possible adjustments to the pool. The wind pool is the last line of protection for people who are denied coverage by private insurers.

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In a recent announcement, Allstate said they would no longer offer homeowners insurance or landlord package policies in the state of California.

The nation’s largest publicly-held individual insurance company explained their decision was in effort to reduce risk.

They have made a series of attempts to reduce their risk in California — including increasing the amount of defensible space around wildfire risk homes to 200 feet, and mandated gas shut-off valves for homes near active fault-lines.

Consumer advocate groups say Allstate’s decision is good for California homeowners.

“Allstate has been making outrageous profits on its California homeowners business in recent years. Allstate can’t bully California into accepting outrageously high rates by threatening to take their coverage and go home,” said Carmen Barber, who is a spokesperson for the Foundation for Taxpayer and Consumer Rights.

Policyholders who currently have Allstate as their homeowners insurer won’t be affected by the departure. But Insurance Commissioner Steve Poizner issued an Order to Show Cause to protect current members against unfairly increased rates.

“Allstate’s decision to not accept new business does not entitle them to charge excessive rates,” said Poizner.

“In the coming weeks, the Department of Insurance will be watching Allstate’s actions very closely to ensure that consumers are protected, and that Allstate fulfills its contractual obligations to its customers,” he added.

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