Changes Coming To Your Next NC Homeowners Insurance Policy Renewal

Effective April 1, 2014, every homeowners insurance policy in NC is changing as it renews.  No, this isn’t an April Fools joke, but for a few unwary homeowners, this will be no joking matter.  And while most of these changes are minor, there is at least one big reduction in coverage that could affect many people.  Here’s a summary of the changes to this form but as always, my advice is that everyone read their policy carefully and consult with their agent for any questions they may have.   

·         A sublimit of 10% of your personal property coverage amount will now apply to any personal property located in a storage facility.  This is the most significant change and could catch some homeowners by surprise should they have valuable items stored in a storage unit.  If you have personal property stored in off premises storage units, then you should contact your insurance agent before your next renewal and make arrangements to protect that property.

·         The new NC homeowners form has a new sublimit of $250 that applies to antennas, tapes, wires, records, disks, and other media in or upon a motor vehicle.  For those of you with valuable CD collections traveling around in your car with you each day, just know that you are now going to be unprotected.  Might I suggest you convert them to mp3 files and put them on a jump drive or perhaps subscribe to a streaming service? 

·         For business personal property located away from your residence premises the sublimit  is increasing from $500 to $1500.

·         The theft peril as regards Personal Property located in student housing  is being modified to allow coverage to apply as long as the student has been there in the past 90 days instead of the previous 60 days.

·         The incidental low power recreational vehicle liability coverage has been modified to expressly exclude motorized scooters used off of your residence premises.  If you are one of the many intrepid souls saving gas by driving your scooter to work take note; you will now need to purchase liability coverage for your scooters.

At Clinard Insurance Group, we want every insurance buyer to be an informed consumer.   We insure thousands of families all across North Carolina, helping them with their homeowners insurance, auto insurance as well as business insurance and life insurance.   If you would like help with any of your insurance needs, please give us a call at 877-687-7557.

Walnut Cove Fire Department Achieves A Better Protection Class Code

The hard working fire department folks of the Walnut Cove Fire Department have successfully improved their fire districts official protection class rating.  And they have achieved this just a few years after they were placed probation for one year as a result of failing to meet state requirements.  Residents and property owners in the Walnut Cove Fire District should enjoy improved safety and perhaps lower property insurance rates as a result of this change.  The new class rating took effect Jan 1^st, 2014.

Several factors go into the development of property insurance rates like the construction materials, the age and what is inside the property.  But a huge part of the rating puzzle comes from the protection class rating.  This applies to all types of property insurance from homeowners insurance to dwelling fire insurance and even business insurance policies like commercial fire insurance and businessowners insurance.  Fire districts are all assigned a protection class rating number between 1 and 10.  The lower numbers indicate better fire protection and will help reduce property insurance rates while the higher numbers indicate poorer protection and thus generate higher insurance prices.   These protection class ratings are certified by the state.  In the process of evaluating these ratings, the state studies the fire department’s ability to respond quickly, whether or not they have water available at hydrants or if they have to carry the water on their trucks.  The quality of the supporting fire departments in surrounding districts can also have an impact on their protection class ratings.

In the case of the Walnut Cove Fire District, they were able to make huge strides in a relatively short period of time to reduce their protection class rating.  For owners of property located inside the city of Walnut Cove their new protection class rating will drop from an 8 to a 5.  For those in a 5 mile district surrounding the town limits, their new class rating has dropped from a 9 to a 6.  The people of Walnut Cove and in particular their fire department should be proud of this accomplishment and what it means for the safety and protection the people and property in the Walnut Cove Fire District.

If you are an owner of property located in the Walnut Cove Fire District, carefully check your next property insurance renewal policy.  If you are unable to determine your property’s protection class from the renewal policy then I suggest you contact your insurance agent to be sure that the policy renewed with the new protection class code applied to the rate.  It would not be unusual for an insurance company to miss these changes and I wouldn’t want you to miss out on the savings that your fire department has earned for you.

Clinard Insurance Group, is an independent insurance agency located in Winston Salem, NC.  One of our missions is to help all insurance buyers to be informed consumers.  We insure thousands of households and businesses all across North Carolina, Georgia, South Carolina and Tennessee.  If you would like help with your auto insurance or home insurance, or your business insurance or even your life insurance, please feel free to call us, toll free, at 877-687-7557.

NC Homeowners Rate Increase May Be Looming – Here’s Why We Need It

NC home insurance rates underwent a 7% rate increase last July and some customers still haven’t felt this increase if their policy has not renewed since then.  Despite this, the NC Rate Bureau last Friday requested another homeowners insurance rate increase.  This new request is for an increase that averages 25.3% across the state.  Wayne Goodwin, the current NC Insurance Commissioner, has stated that he will not approve this rate increase.  This will mean that the process will require a hearing to issue a ruling one way or the other which could then be appealed to the courts.  Even though the overall requested rate increase statewide is 25.3%, the actual rate increases by territory will vary.  Some territories could see decreases of up to 2.7% while other territories, especially coastal ones would see increases as high as 35%.

The struggle between the insurance companies and the NC Insurance Commissioner over homeowners rate levels is at once political and economic.  From the comments section of the various news feeds online, I see that the general public is overwhelmingly in support of the insurance commissioner and his goal of holding down rates.  While this is an expected result, it does underscore the fact that this is a very political issue.  Since most people react to this news by considering only their pocketbook, then it is only natural for an elected politician to want to pander to their stance.  But I believe that If consumers were able to better understand the economic equation that insurance companies face, and also see how the unraveling of what used to be a stable insurance marketplace negatively affects them, then they might have a different viewpoint.   

To that end, I want to give my readers a different perspective on the negative impacts on their lives that a distorted and dysfunctional insurance marketplace can generate.    Here  I will share with you here an insider’s view as to what has already happened and what I think we can expect if we continue down this path of infighting between the NC Insurance Commissioner’s Office and the NC Rate Bureau over NC property insurance rates.

You need to know that the NC Rate Bureau is an entity that is owned by the member insurance companies who sell insurance in our state.  Its goal is to pool loss data for statistical purposes and to use that data to generate rates for many types of insurance policies.  This large pool of insurance claim and loss data should, in theory, allow the rate bureau to make rate requests that are more accurate than any one insurance company could generate with their own partial loss data.  And what the Rate Bureau is telling us is that the losses in our state for homeowners insurance are far exceeding the premiums that the insurance companies are allowed to charge to pay for them.

From my perch as an insurance agency owner, I have witnessed a number of big changes taking place in the home insurance over the past 3 years.  Compared to the decade leading up to 2010, our current homeowners insurance marketplace is currently dysfunctional and getting worse each month.  The burden of these changes has fallen squarely on the insurance agent’s shoulders to be sure, but they are also falling disproportionately on the shoulders of the customers who become caught up in the tangled mess that inadequate rates leave behind.

The first beginnings of change came in late 2011 when the largest insurance companies changed their underwriting rules such that they would no longer write new homeowners insurance policies without the supporting auto insurance for that same customer.  This is because while the home policy was statistically guaranteed to lose money for them,  there was enough profit in auto insurance to cover those losses.  Shortly thereafter, smaller insurance companies, not wanting to be left holding the bag, changed their rules to match those of the big boys.   Today you would be hard pressed to find an insurance company willing to write a new policy on your home without demanding the insure your autos as well.   The burden of this change fell hardest on the elderly who still owned their homes but had stopped driving.

Not long after that, insurance companies decided to extend this no home without auto rule to apply to their existing book of business.  Now they wouldn’t renew a homeowners policy if they didn’t also write the auto insurance.  Suddenly many homeowners who insured their home and auto policies with different companies were facing a non-renewal of their home insurance unless they brought their auto insurance to that company as well.  This change dragged quite a few more homeowners into the vortex of marketplace disorder. 

As insurance companies were turned down for one rate request after another, many chose to use an archaic rule, called consent to rate as the tool to get their home insurance clients to pay them rates that are above the state mandated maximum rates that the insurance commissioner has allowed.  This was a way, albeit one policy at a time, to make an end run around the insurance commissioner’s power to control rates.  But as you can imagine, asking clients give you written permission to increase their rates, one policyholder at a time is a very inefficient and costly way to get a rate increase.  Now an additional number of homeowners insurance customers were drug through a new paperwork mess that even left some with no coverage at all.  I have no doubt in my mind some homeowners out there who think they have coverage, do not because they failed to sign a consent to rate letter in time.  With no signature, their policy would not have renewed and if they didn’t notice that they didn’t pay a bill recently, they may not realize that they have no coverage.

One of the more dislocating gyrations of this dysfunctional market occurred when several insurance carries simply stopped doing business in NC.  They non-renewed all of their policies and moved on.  This kind of action reduces competition between insurance companies, and puts additional upward pressure on pricing.  In addition, when they leave, they leave all insurance markets, so we see reduced competition and higher pricing in other areas like auto insurance, business insurance and workers compensation insurance.

More recently we see insurance companies reducing the coverage provided under their homeowners insurance policies.  If they can’t raise rates then they need to reduce losses and that means reducing coverage under the policies themselves.  The most dramatic of these are special, higher deductibles for wind and hail claims and reduced coverage for roof damage.    If you don’t read the fine print, you may not realize that your policy has changed and perhaps  now you have a $5000 wind and hail deductible, or a deductible equal to some percentage of a wind and hail loss.   Worse yet, we are also seeing a number of insurance companies reducing the coverage for damage to roofs from a full replacement cost protection to a depreciated value protection.  This could cause serious cash flow issues for homeowners with a damaged or destroyed roof.  Imagine that your roof is damaged in a hailstorm and you must replace it.  Assume that you have a 30 year roof on your house and it is 20 years old.  If the cost to replace the roof is $15,000, then with depreciated value protection, you will only receive 1/3, or $5000 for this insurance claim.  You will have to come up with the other $10,000 to replace your roof out of your own pocket. 

All of these results are generally negative for the consumer and they hit consumers unevenly.   If insurance is to do anything at all, it is to pool assets among a large group of people so that everyone suffers just a little and no one suffers a lot.   And while many consumers will tell you that insurance companies are out to screw them over, they should understand that these insurance companies are operating in competition with each other and none of them are getting rates high enough to make a profit so they are stripping down the policy or putting consumers through the consent to rate process in order to attempt to make a profit and stay in business.  Only a diehard conspiracy theorist would believe that this many insurance companies would take this much drastic action in a competitive environment if they didn’t feel they had to in order to survive.  If our insurance commissioner would allow the free market to operate then insurance rates will go up right away, but over time competition will allow rates to stabilize and settle at a level that allows for a more stable insurance market.   I know no one wants to pay more for their insurance but blindly supporting a politician’s goal of keeping rates below profitable levels will generate more pain and agony for all consumers over the long haul.

At Clinard Insurance Group, we insure thousands of families all across North Carolina.   We want all insurance buyers to be informed consumers.  If you would like help with your home or auto insurance, life insurance or business insurance, please call us, toll free at 877-687-7557.