HOME INSURANCE

• Nationwide, most homeowners tend to underestimate risk and do not understand that their policies do not guarantee replacement of their homes. For example, 40% of homeowners in California lack enough insurance to cost their home-replacement costs and don’t know that. The problem is also significant for all homeowners living in high-risk flood zones throughout the nation. (After Fires, Homeowners Feel an Insurance Pinch, New York Times, November 13, 2007)
• Meanwhile, the property insurance industry, including home, auto and commercial coverage, reported a record profit of $44 billion in 2005, even after paying $41 billion in damages from Katrina. The industry set another record for profit in 2006 at $64 billion. 2007 is shaping up to be another lucrative year, particularly because no major hurricane hit the coasts. (Insurers Shift Cost Burdens to Homeowners, New York Times, November 23, 2007)
• Average annual insurance premiums nationwide have increased by over 50% to $866 in the last ten years, but in coastal areas they routinely run into the thousands. Furthermore, in these high-risk areas, insurance companies have either canceled or declined to renew several million policies. (Insurers Shift Cost Burdens to Homeowners, New York Times, November 23, 2007)
• Many policies are limited and don’t cover replacement costs, thus placing more burden on the homeowner, so states have created state-run insurance companies to provide the necessary coverage. (Insurers Shift Cost Burdens to Homeowners, New York Times, November 23, 2007)
• Other strategies include dramatically increasing the deductible, in some instances to as much as 5 percent of the damage. (Insurers Shift Cost Burdens to Homeowners, New York Times, November 23, 2007)