Automobile Insurance
Homeowners Insurance
Business Insurance
Payments & Claims
You te...
ar open the electric company's envelope and glance at the amount.
"Close to last month's," you recall.
Then you open the envelope from your insurance company and gasp. The bill for your homeowners insurance is several hundred dollars more than what you paid last year.
"There has got to be some mistake," you say and you make a mental note to call your agent the next day.
This scene has been playing out thousands of times across Tennessee. It is likely to continue through the first quarter of 2013. Rate increases have not been the only thing insurance companies have been up to as they try to control upward spiraling homeowners insurance claims.
The homeowners insurance marketplace has become a "Buyer Beware" market place. Here are some things you should know if you go homeowner insurance shopping:
Replacement Cost does not mean the same thing to all insurance companies. For example, State Farm offers functional replacement cost coverage. This means that if your oak banister is destroyed and must be replaced, the insurance company may replace it with pine, stained to look like oak. It's functional, so you must accept it. Other insurance companies, such as Travelers, will replace the banister with oak. Their replacement cost is a percentage of extra value above the value for which your home is insured. Which will you choose?
Deductibles have changed in the homeowners market place. The new recommended deductible is $1,500. Rates for lower deductibles will continue to increase. But a higher deductible is usually better than a percentage deductible. State Farm and others are now using percentage deductibles regularly. They sound good on the front end but they will cost you when a claim occurs. A 2% deductible on a $400,000 home is $8,000!
Beware of multiple deductibles.You may find that when a claim occurs you are facing two deductibles. One on the structure of your home and one on the contents of your home. Lucky for consumers this is not a popular strategy. One company, the Hartford, is actually doing just the opposite. They offer a special endorsment for a single deductible if your auto and homeowners are damaged in the same incident. Good for Hartford! So you need to make sure you understand how deductibles apply to a claim.
Beware of Actual Cash Value coverage on your roof. My understanding is Tennessee Farm Bureau and Allstate/e-insurance will no longer offer Replacement cost on roofs. They are not the only insurance company using this strategy. Here's how it works: Your 20 year roof is destroyed in the 15th year by a hail storm. It costs you $8,000 for the roof 15 years ago. The new roof cost is $12,000. You will get a check for about 25% of the $8,000 you paid for the roof, less your deductible. If your deductible is $1,000, you'll have a whopping $1,000 check from your insurance company. Now you only have to pay $11,000 out of your pocket for your new roof. Are you a happy camper?
None of these strategies are illegal. The insurance companies may offer any insurance contract approved by the State of Tennessee. Nevertheless, I see two problems:
1.The insurance sellers are not doing a good job of informing the public of these changes.
2.The insurance buyers are not reading their policies and asking the right questions.
That is the perfect storm. Hang on; it's going to be stormy weather for a while.
"Close to last month's," you recall.
Then you open the envelope from your insurance company and gasp. The bill for your homeowners insurance is several hundred dollars more than what you paid last year.
"There has got to be some mistake," you say and you make a mental note to call your agent the next day.
This scene has been playing out thousands of times across Tennessee. It is likely to continue through the first quarter of 2013. Rate increases have not been the only thing insurance companies have been up to as they try to control upward spiraling homeowners insurance claims.
The homeowners insurance marketplace has become a "Buyer Beware" market place. Here are some things you should know if you go homeowner insurance shopping:
Replacement Cost does not mean the same thing to all insurance companies. For example, State Farm offers functional replacement cost coverage. This means that if your oak banister is destroyed and must be replaced, the insurance company may replace it with pine, stained to look like oak. It's functional, so you must accept it. Other insurance companies, such as Travelers, will replace the banister with oak. Their replacement cost is a percentage of extra value above the value for which your home is insured. Which will you choose?
Deductibles have changed in the homeowners market place. The new recommended deductible is $1,500. Rates for lower deductibles will continue to increase. But a higher deductible is usually better than a percentage deductible. State Farm and others are now using percentage deductibles regularly. They sound good on the front end but they will cost you when a claim occurs. A 2% deductible on a $400,000 home is $8,000!
Beware of multiple deductibles.You may find that when a claim occurs you are facing two deductibles. One on the structure of your home and one on the contents of your home. Lucky for consumers this is not a popular strategy. One company, the Hartford, is actually doing just the opposite. They offer a special endorsment for a single deductible if your auto and homeowners are damaged in the same incident. Good for Hartford! So you need to make sure you understand how deductibles apply to a claim.
Beware of Actual Cash Value coverage on your roof. My understanding is Tennessee Farm Bureau and Allstate/e-insurance will no longer offer Replacement cost on roofs. They are not the only insurance company using this strategy. Here's how it works: Your 20 year roof is destroyed in the 15th year by a hail storm. It costs you $8,000 for the roof 15 years ago. The new roof cost is $12,000. You will get a check for about 25% of the $8,000 you paid for the roof, less your deductible. If your deductible is $1,000, you'll have a whopping $1,000 check from your insurance company. Now you only have to pay $11,000 out of your pocket for your new roof. Are you a happy camper?
None of these strategies are illegal. The insurance companies may offer any insurance contract approved by the State of Tennessee. Nevertheless, I see two problems:
1.The insurance sellers are not doing a good job of informing the public of these changes.
2.The insurance buyers are not reading their policies and asking the right questions.
That is the perfect storm. Hang on; it's going to be stormy weather for a while.