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Welcome to
our Blog Archives page. Here you will find information previously posted at
our Insurance Blog. For the latest updates, please visit that site at
www.NYAutoandHomeInsurance.com.
These days, the insurance industry, especially in
catastrophe hurricane exposed areas like Long Island, is
changing very quickly. This is very different from not too
long ago. Insurance companies and their employees tend to be
very conservative, resisting changes sometimes for years
before caving in. Agents tend to be the same, because our
job is to protect against risk of loss, as opposed to many
other business and personal models, where taking risks is
part of the fun.
These days, change is fast and drastic. I have not posted
here in about a month and a half, but in that time, several
more carriers have stopped or severely cut back on writing
home insurance on Long Island, especially within a half mile
of the water. The latest one I heard about was State Farm,
who stopped writing new policies within 2500 feet of the
Bay. Adirondack Insurance recently severely limited their
new policies in all of Suffolk County regardless of distance
to water, and New York Central Mutual is not only limiting
new policies, but they recently became part of the group
that is actually canceling people.
Allstate continues to cancel thousands of policyholders,
though they have made some efforts to bring other companies
to the table so that their Long Island agents still have
something to sell. There are almost no new players coming in
to the New York market, except for some 'excess lines'
carriers such as Lloyd's of London and Lexington Insurance
Company. These carriers write policies at a much higher
price, but at least they make coverage available.
If it turns out you are forced to seek insurance from one of
these non-standard companies, be sure the agent you are
dealing with has experience with them, especially with
waterfront home insurance issues, and knows what to look
for. We have seen policies that COMPLETELY EXCLUDE wind
damage! What is the point of having insurance if you are not
covered for a hurricane, which is just a big windstorm with
a name? Some of these policies also carry exclusions for
pets, underground oil tanks, and other unusual clauses. We
have also seen policies that offer 'actual cash value'
coverage on the structure itself, which takes depreciation
based on age, as opposed to a 'regular' homeowners insurance
policy which insured at replacement cost.
Of course, these policies still do not cover flood damage
even though they may cost 2-3 times more than what was
considered normal for Long Island home insurance only a
couple of years ago. Flood insurance continues to be
available through your local agent via the FEMA National
Flood Insurance Program, and excess flood insurance is
available from a number of companies, when the $250,000
maximum building coverage through the FEMA program is not
enough.
Remember also that if your policy is through an excess and
surplus insurance company, you are NOT protected by the New
York State Guaranty Fund. That fund provides up to
$1,000,000 in coverage if an insurance carrier defaults or
becomes insolvent. Lloyd's prides itself on never having
defaulted on a claim in over 100 of years of existence. And
Lexington is part of AIG, the world's largest insurer.
Still, the fact is they are not subject to regulation by the
New York State insurance department, nor backed by the
Guaranty Fund.
Another solution that is being used is the New York Fair
Plan, otherwise known as NY Property or NYPIUA. That is a
state-run operation that was designed to provide basic fire
insurance for properties in blighted areas or which have
other problems. But the policies provide NO liability
insurance, no theft coverage, no coverage for burst pipes,
and have many other restrictions. Again, in some cases, this
may be your only practical option, but you need to be aware
of just what you are buying. We have come across insurance
offices here on Long Island telling their clients that they
are getting a homeowners policy from NY Property, and
nothing could be further from the truth.
As always, for more information, visit our sites at
www.NYInsuranceWithService.com or
www.FloodInsuranceNY.com.
Back to Top
What is a Hurricane/Wind deductible and
why is it on my Homeowners Insurance policy?
If you are a resident of the Long Island area and have not
looked at your homeowners insurance policy lately, you
probably should. One of the big changes that has come about
over the last couple of years is the addition of a special,
higher deductible for hurricane damage. Sometimes the higher
deductible is for 'wind and hail', not just specifically
hurricane. It depends on the insurance company.
So what does this mean? Quite simply, it means that if Long
Island is hit by a hurricane, instead of your standard
policy deductible of $500 or $1000 (the amount you have to
pay in a property loss, after which the insurance company
pays) may instead be tens of thousands of dollars! Usually,
the deductible is a percentage of the amount of insurance on
your house, ranging from 2% to as much as 10%. By law, the
insurance companies must put both the percent and the dollar
amount on the face of your policy.
These are being dictated by the reinsurance companies, the
place where insurance carriers go to protect themselves
againts catastrophic losses (those that affect large numbers
of policy holders at the same time). These are your giant
off-shore companies, many based in Bermuda or in the London
market. They are not subject to the same state regulation as
our 'domestic' carriers, and so they can decide what they
want to charge and what coverages they will provide, and our
Long Island homeowners insurance carriers pretty much have
to live with it or assume more risk themselves, which they
don't want to do.
As an example, if your house is covered for $400,000 and you
have a 5% hurricane deductible, you would have to shell out
$20,000 after a hurricane before your insurance company
would be involved. And one of the biggest problems is that
there is no standardization among the insurance carriers.
Some have deductibles that activate with ANY hurricane that
hits Long Island, some for category 2 storms, some just for
any wind or hail whether or not it's associated with a
hurricane.
There has been some talk in the state legislature about
allowing a tax deductible savings plan that people can put
money into each year to prepare for paying these large
deductibles if a hurricane hits. The Small Business
Administration (SBA) may also get involved in offering low
interest loans but that is not guaranteed at this point in
time. You can also buy an insurance policy to cover the
deductible, from Lloyd's of London, for about 10% of your
deductible. So in our example above, it would cost $2000 a
year to cover your $20,000 deductible, not a very good bet.
This is an evolving area and as insurance agents here on
Long Island, and in particular in Suffolk County, we need to
be paying attention. But as consumers, readers of this
article need to look at their own policies and make sure you
understand what coverage you have so it doesn't come as a
surprise when the inevitable storm hits.
Back to Top
First 'Wind vs. Flood' Insurance Lawsuits from Katrina
Well, we knew it was coming, but
the first lawsuit against insurance companies resulting from the denial of
Katrina claims has started. Unfortunately, most people did not have flood
insurance, either because they felt they were protected by the levee system
(those people may have a legitimate beef with the Army Corps of Engineers or
others, in thinking the levees should have worked) or they thought they were far
enough from the water to be safe.
In the recent flooding in some upstate New York counties, it has been estimated
that only one per cent of the people had flood insurance. If you live in a
mountainous area, it's hard to imagine needing flood insurance, but FEMA
estimates that 25% of all flood claims come from areas that are NOT considered
'special flood hazard areas.'
Here on Long Island, and especially in Suffolk County (the further east you go,
the more Long Island is considered vulnerable to hurricanes and other such big
storms) we have a slightly different situation for those right down by the
water. Since most homes have been built or in some way refinanced over the past
35 years (since the National Flood Insurance Program started), most have been
required by their banks to carry both wind (homeowners insurance) and flood
insurance. Many people should probably review their limits to be sure they are
enough, but there is a lot of flood insurance in force near the South Shore.
Move a few blocks north of the water, however, and the situation is quite
different. That's where the flood zones change to something other than 'A', and
the banks have, until now, not been mandated to require flood insurance. That is
all about to change as congress works on the 2006 Flood Insurance Act which will
change the whole system to require more participation based on what happened
with Katrina.
A few weeks ago Newsday published a map that clearly shows what our Emergency
Preparedness people have been telling us for a long time. Based on elevation
(facts, not guesses), water from a hurricane the size of Katrina would bring
flooding past Sunrise Highway in many places, and certainly much further from
the shore than has been seen in the memories of most of us.
Still, flood insurance in those Long Island areas outside the hazard zones can
be as little as $352 (even less for a house on a slab), so many people are
buying it anyway, since it seems a small price for a lot of peace of mind.
As always, for more info on flood insurance, visit our site at
http://www.floodinsuranceny.com/.
Back to Top
Long Island Flood Insurance Facts and Myths
May 6, 2006
This week we will take a little break from our discussion of the Long Island
homeowners insurance crisis, and talk a bit about the other type of coverage
that is very important if a hurricane hits Long Island, flood insurance.
Standard insurance companies long ago decided that they could not provide
coverage for flood because it is catastrophic in nature, in other words, it can
cause large amounts of damage to large numbers of property all at once.
The big insurance carriers are not afraid of a fire, which might affect two or
three homes, or a large building. But a flood that wipes out the entire South
Shore of Long Island could put all the insurance companies out of business, as
losses could easily reach hundreds of billions of dollars.
So about 40 years ago the Federal Emergency Management Agency (FEMA) was charged
with designing a program for flood insurance. That was the beginning of the
National Flood Insurance Program (NFIP). The idea was that loss payments would
be guaranteed by the Federal flood insurance program but would be sold and
serviced by both the NFIP itself and other insurance carriers who would be paid
a fee for each policy they administer. Coverage is sold through local agents who
choose to participate.
Communities were invited to join the NFIP flood insurance program in the late
1960's/early 1970's. As part of the requirements for joining, they had to agree
to various changes in their building codes so that homes built after the date
they came in to the program would be elevated beyond the 100 year flood plain
level, meaning they would be much less likely to be damaged in a flood unless it
was a really bad one. In return, those homes in flood hazard areas which are
properly elevated get a much lower rate for their flood insurance.
All land areas are divided into flood insurance zones based on the ground
elevation where they are. Naturally, the general tendency is that as you move
away from the water, the hazard drops. However, it has been estimated by a
number of experts that if a category 3 or better hurricane, such as Katrina,
were to make a direct hit on Long Island, the water would reach Sunrise Highway
in most areas, because the ground doesn't really start to rise until a few miles
in.
The good news is that most homes more than a few blocks from the water are in
what's called non-flood hazard areas, and flood insurance is pretty cheap for
them. But near the water, and even moreso over on the barrier islands (where
houses are not really damaged by floods as much as they are completely swept
away) flood coverage can be fairly expensive. Our office writes a fair number of
flood insurance policies for people on Gilgo Beach, Oak Beach, and Fire Island,
and each one is individually rated by the flood insurance carriers based on
location, elevation, and more.
Many people were required to buy flood insurance for the first time only in the
past few years. As the mortgage refinancing and home equity loan boom happened
over the past 5-7 years, with many homes being sold and many more seeing their
equity taken out in the form of home equity loans and lines of credit, people
learned something interesting about flood insurance. Since it's a federal
government program, and the federal government also guarantees mortgages through
the Federal National Mortgage Agency (FNMA or Fannie Mae) and GNMA (Ginny Mae),
they also REQUIRE the purchase of federal flood insurance for homes in flood
hazard areas. This puts more money into the National Flood Insurance Program
through increased participation.
Back to Top
Long Island Homeowners and Flood Insurance Issues,
Continued
September 23, 2006
It's been a few weeks since I had a chance to write a post. Mostly it's
because we have been renovating my office. We have had two or three work crews
at a time here daily. Now it's getting down to the trim and painting, so it's
just a little slower. You can see pictures of how it's coming out at my other
blog,
www.aroundbabylon.com.
Anyway, my being busy has not stopped things from happening in the Long Island
homeowners insurance and flood insurance market. Since I last wrote, several
more companies, some of them fairly large players, have either announced that
they will no longer be writing homeowners insurance either here on Long Island
or, in some cases, in New York State.
Part of the problem is that here on Long Island is where the largest
concentration of high valued homes exists. So many companies tried to write lots
of business here to increase their cash flow, but are now in panic mode because
after seeing what happened with hurricane Katrina, they now realize that they
have a big exposure here that is not offset by customers in other areas that are
not subject to 'coastal' issues.
For instance, it's not that people in upstate New York never have claims. And
they DO have 'catastrophic' claims using the insurance meaning, which refers to
something that affects a lot of people all at once, as opposed to a fire at
someone's house, which might melt some siding on the house next to it, but
generally does not affect a whole area.
In some upstate counties, for instance, they can have major ice storms that
damage a lot of houses. But it's still not nearly the same as here on Long
Island, because the houses tend to be much further apart (less concentrated) in
most upstate areas, and the values are lower. As we all know, a house that sells
for $450,000 here can still be had for $200,000 in most other parts of the
country, maybe even less in some.
Interestingly, some of these areas that you would not expect have flood issues
as well. Newsday a couple of weeks ago had an article about a number of people
who live in Pennsylvania, along the Delaware river, just 'downstream' from the
reservoir system that provides water to New York City. It seems that because of
droughts that have occurred in the past few years, the water people now try to
keep the reservoirs at 100% of capacity. But the flip side of that is when it
rains a lot, BILLIONS of gallons of water overflow the reservoirs and have been
creating flooding problems along the Delaware river!
There are a lot of post-Katrina changes coming to the Federal Flood Insurance
program through FEMA, and some of them won't be pleasant for those living in
primary and secondary flood hazard areas. More to follow on that, but in the
meantime if you have questions, you can contact us through our web site at
www.FloodInsuranceNY.com
Back to Top
Getting Cheap Insurance Quotes,
continued
One of the things that has
changed over the past five years or so when you shop around for
auo and home insurance is that you are asked for your Social
Security number. In these days of privacy concerns, that’s not
an easy thing to give out, nor is it pleasant for us to ask.
However, it’s a ‘fact of life’ now in the business, and
in fact, any insurance quote you get without giving your
Social Secuity number is, at best, a wild guess, and at worst, a
lowball quote. The only exception is in a case
where you are specifically told by the agent or company that
they are using a company that does NOT do insurance or credit
scoring, and that is becoming more and more rare.
These days, most companies have anywhere from 10 to 100
different rating tiers, and your placement depends more on your
score than on any other single factor. Some of your rate is, of
course, still based on traditional factors like violations and
accidents for car insurance, or age of dwelling and nearness to
water for home insurance.
But for most companies, your final rate is as much determined by
your score as by anything else. Your insurance score is
typically made up of about 150 elements, each assigned a
weighting. The factors vary from company to company, though a
lot are common to most. Those might include home ownership,
length of time on your job, and things like that. But the
biggest part of your insurance score, make no mistake, is your
credit history. Research data companies such as ChoicePoint and
Fair Isaac have come up with a whole bunch of characteristics of
people that correlate with those who have fewer insurance
claims.
In some ways, it’s fairly obvious. I have no trouble believing
that the kind of person who pays all their bills on time all the
time is also the person who does preventive maintenance on their
house and cars which helps reduce both the frequency and
severity of claims. But make no mistake, these data companies,
and the insurance carriers that are using the data, are not
concerned with why there is a difference. They make no
claim that having a good credit history is the reason a
person has lower claims. They just know that they can show a
good historical relationship, and so can use it to give each
client what they feel is an appropriate price.
Our office still has carriers for both auto insurance and home
insurance that do not require an insurance score, but in both
cases, chances are the rate will not be the lowest it could be,
even if your credit is not sparkling clean. Still, some people
want the option. But if you want the best insurance rates, you
can help yourself a lot by working on your credit score.
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Back to Top
So You Want Cheap Car
Insurance?
Car insurance, along with home insurance, has been getting
more and more expensive. And that trend is expected to continue, even if
sometimes there is a break for a year or two. Some of it is due to higher
costs to rebuild houses and repair cars. Some is due to all the lawsuits
from car accidents, dog bites, trampoline spills, and so on. Some is due to
outright fraud. And I’m not talking about padding bills a little, I’m
talking about completely staged accidents that were intentionally done so
that an insurance claim could be filed. In addition, things like mold,
hurricanes, and other large losses are making it hard for insurance
companies to be confident in their pricing.
Especially in the downstate area including Nassau and Suffolk Counties on
Long Island, costs are high. In those areas fraud is worse, and repair costs
are even higher. In addition a large part of the biggest claims in car
insurance are for medical expenses, and we all know what has happened to
those over the past decade.
Well, everybody wants cheap car insurance, but what can you do to get it?
There are several ways to start. First is to shop around or have an agent
(like us) who shops around for you. Maybe not every 6 months, because unless
something drastic happens, but it pays to look at it every couple of years
or so. You should also take the highest deductibles you can afford on your
fire, theft, and collision coverages, especially if you have more than one
car. The savings on one car, going from a $250 to a $500 deductible, is
decent, but if you have several cars, the savings are multiplied, and the
odds of you having a claim on more than one car in a given policy period are
small.
Another thing you can do is take the National Safety Council Defensive
Driver course which is offered all over and will save you 10% on most parts
of your policy. Remember that you have to take this course every three years
to continue getting the discount.
One thing you don’t want to cut back on is your liability coverages. For one
thing, you need to be protected against the lawsuits that seem to happen
every time cars meet by accident. But the second part of that is that
insurance companies often do NOT give their best rates to people who carry
‘minimum coverage’. They have found over the years that people who want to
protect themselves better make better insurance customers as well.
But these days, the real way to lower your rates for both home insurance and
auto insurance is to have a good ‘insurance score’. And that will be the
topic of my next post! |
