ALLCHOICE Insurance is proud to welcome a new member to our family.  A resident of the Lake Jeanette area of Greensboro, NC recently moved his family’s personal insurance (Home, Auto, & Umbrella Liability) from Nationwide and saved 22%.

While ALLCHOICE’s primary concern is to properly protect our clients assets, it is always nice when we can save them a little money as well!

According to a recent North Carolina Insurance Department – North Carolina Farm Bureau Rate Filing

North Carolina Farm Bureau Insurance (NC Farm Bureau Mutual Insurance Company & NC Farm Bureau Insurance Group), filed for (was granted) a Homeowner’s Insurance Rate Increase with the North Carolina Department of Insurance. The overall rate change is 7.3%, however, the amount of the increase varies dramatically, ranging from -9% to +44%.  In addition to the rate increase, NC Farm Bureau Insurance is also revising several of the stated deviations (deviations are how Insurance Carriers provide both discounts and increases when pricing a policy).

Important Deviation Changes

• Base Rate Deviations – Farm Bureau is revising their territory base rate deviations, and introducing a Multi-Policy Component.  The deviation between a Homeowner’s Policy with an accompanying auto insurance policy and a Homeowner’s Policy with-out an accompany auto insurance policy is generally between 5-7%.  Meaning, a “Home Only” policyholder will see a larger increase than policy holders who have both Home and Auto Policies with Farm Bureau.
• Enhancement Deviation – The purpose of this deviation is to temper the increases that result from the combination of other deviation changes.  From the filing, the larger increases will occur for newer homes insured for over $400,000 & with Deductibles of $1,000 of higher.

For more information about North Carolina Homeowner’s Insurance, Jack Wingate, or ALLCHOICE Insurance, please visit http://www.allchoiceinsurance.com

More

As an insurance profressional, I continually remind myself that my customers (for the most part) do not fully understand the coverages that they have (or don’t have).  In all honesty, they shouldn’t have to.  If every person fully understood exactly what coverages are present, or not, in their various insurance policies, there would be no need for someone like me.  Insurance carriers would simply move their “distribution” system to an online environment (hello GEICO).  Customers would go to a website, type in what they needed coverage for (exactly), press a button, and presto!  The problem lies in the details.

Many people think they know what is covered under their various policies (like Home Insurance & Auto Insurance) simply because they can read their coverage limits off of their current declarations page.  While this does tell you what coverage limits you have, does this actually tell you under what circumstances these coverages would “kick in”.  If you really think about it, you have the insurance coverages / limits (auto and home) you have today because the first time you purchased insurance someone (friend, parent, insurance agent) told you that this limit or that was what you needed.  Under that assumption, you better hope that your source was very smart.

The value of understanding exactly what is covered and what is not on an insurance policy became clear to me when I was hit in the face with a fresh dose of reality on a snowy winter day in January.  I was just finishing a great book by Vince Flynn when my oldest daughter yelled from the basement that the floor was wet.  Having dealt with a few times where it had rained so much that water had gotten in our basement, I knew what weather conditions caused such an event.  While we had received quite a bit of precipitation, the form we received was in the form of white powder (better known as snow) and not the clear liquid which could usually lead to a basement of water.

Wearing a T-Shirt, jeans, socks, and a pair of flip flops (I thought you should get that odd visual in your head); I rushed down the steps to get a handle on the situation.  Our washing machine is downstairs, so I first thought that maybe a hose had come loose and soaked the basement.  Once my feet landed on the terracotta colored tile that covered the bottom stoop, I swung my gaze to the right.  As I looked into the half bathroom that was at the bottom of the steps, I realized that I would have been lucky if the water had come from the washing machine.

Much to my dismay, the “water” was coming from, and mostly contained in, the bathroom.  None of the kids had been in the basement for days, so I knew something was disgustingly wrong.  As I entered the tiny bathroom, I looked into the toilet and was overcome with….well just let me say I was overcome and leave it at that.  Evidently, my “waste” line had backed-up.  Being the lowest plumbing fixture in the house, all water and waste that had been used in the house was now backing up in this particular toilet.  Of course, a single toilet can not hold all of that run-off, so fluid had come out and on to the floor.  Needless to say, I am happy I have a strong stomach and a Shop-Vac.

Luckily for me, we caught the problem in time.  We were able to get the water off the floor and mediate the problem before any real damage was done.  However, once I was done cleaning up my first thought went to a little known fact about home insurance.  To that end, I thought it would be helpful to give a little lesson about Home Insurance.

Homeowner’s Insurance Covered Cause Of Loss

I would assume that if I were to make a wager with every person who reads this article (which is not an insurance professional (notice I said professional and not agent as I would win my bet with most agents)) that they could not tell me if the difference between a Named Peril Policy & a Special Form Policy, that I would make a few bucks.  The fact is, most people do not even know what a “Peril” is.  Let the class begin!

Dictionary.com gives the following definition:   Peril:  something that causes or may cause injury, loss, or destruction.

Now that we know what a “Peril” is, we need an understanding of the common property insurance forms: Named Peril & Special Form.

Named Peril

Just as the name suggests, the policy will cover only those perils that are specifically listed (named) in the policy.  Comparitively speaking, this policy type provides the least amount of actual coverage.

Special Form

In direct contrast to the Named Peril coverage form, the Special Form coverage form provides coverage for ALL Perils unless the policy specifically EXCLUDES coverage.

North Carolina Home Insurance Common Policy Form(s)

To the best of my knowledge, the majority of North Carolina Homeowner’s Policies are on one of two Homeowner’s Forms (HO-3 & HE-7).  Both of the aforementioned North Carolina Homeonwer’s Form are Special Form policies.  As a matter of performing your due diligence, I would suggest you determine which form your current home is covered under.  To be clear, when I refer to “Homeowner’s Insurance” I am referring to policies that cover your primary residence and not property that you may hold for rental.

Damage Caused By Water / Sewer Backup

The HO-3 & HE-7 policy forms both have the following Exclusion:

Water Back-Up Of Sewer Or Drains

Included in the HE-7 Form with the HE-21 Endorsement

1. The policy forms excludes coverage for loss resulting from water or water-borne material which backs up through sewers or drains or which overflows or is discharged from a sump, sump pump, or related equipment.
2. The policy may be endorsed to provide such coverage up to the policy limits of liability

Conclusion

Hopefully you have a better understanding of Perils, Named Peril Policy Forms, Special Form Policy Forms, & Water or Sewer Back-Up.  You might think that this particular endorsement or coverage does not apply to you.  Let me give you a nugget of wisdom:

If you own your home, there are, to my knowledge, on two ways that your “waste” can leave your house (and I am talking about waste in the plumbing since of the word).  Your home is either hooked into the city sewer system or you have a septic system.  In either case, your waste system can become clogged or broken and literally “back-up” into your home.

While I hear the argument daily about not needing this coverage because “I am on city sewer”, what you may not understand is that the city is not going to take responsibility for any damages (to the system or your property) unless the problem is found to be on their property.  That means that if there is a problem in one of the drain lines (underneath the ground) but still on your property, the “city” has determined that they are not “at-fault”, thus you get no help from them.

If your North Carolina Home Insurance policy is not endorsed to cover Water or Sewer Back-Up, you should highly consider it.  Most carriers charge an additional $25 (approximate) a year to add this coverage back.

About The Author:  Jack Wingate is the Co-Founder and President of ALLCHOICE Insurance in Greensboro, NC.  For more information about Homeowner’s Insurance, ALLCHOICE Insurance, or Jack Wingate, please visit http://www.allchoiceinsurance.com

North Carolina home owners are facing challenges from numerous directions these days.  We all know the challenges that exist with the real estate market collapse, and the effect on home values.  Most North Carolinians should be some what familiar with the challenges with insuring their homes due to the North Carolina Beach Plan.  The latest challenge comes from a recent press release from the Department of Insurance which announces a Class Action Lawsuit brought against the state’s leading Home Insurance Provider, Nationwide Insurance.

Undoubtedly, you have seen the marketing from the leader in North Carolina Homeowner’s Insurance.  I believe it states something to the affect of them being “on your side”.  It seems that mantra is not necessarily true in North Carolina.  In the Department of Insurance’s press release, the class-action suit states that Nationwide underpaid policyholders by not including general contractor’s overhead and profit.  That means, the policyholders had to pay those costs out of their own pocket.

When you take the state of the economy, the problems caused by The Beach Plan, and the fact that North Carolina’s largest home insurance provider is settling a lawsuit where they did not pay their claims properly; North Carolinians should be very careful when it comes to choosing an insurance carrier.  The problem is, how do you go about choosing the right carrier?

The first issue that you must investigate is…given the problems insurance carriers face with the NC Beach Plan, which carriers are committed to providing home insurance in North Carolina.  Over the past 12-18 months, there have been numerous carriers that have decided to stop writing and even cancel their current Homeowner’s Insurance policies.  The most prominent of those carriers was Farmers Insurance.  While there are still plenty of options in North Carolina, many carriers are still considering whether to stop writing NEW homeowners policies, reduce the amount of NEW homeowners insurance, reduce their current homeowners insurance market, or completely leave the homeowners insurance market.  You should ask your current insurance agent, as well as other insurance agents, about the plans of their insurance carriers.  While you might not get honest answers from everyone you speak with, you should be able to read between the lines.

The second issue that you must investigate is the financial stability of the remaining insurance carriers.  You hopefully have widdled your potential carrier list down from the aforementioned investigation, now you have to see which insurance carriers are financially stable enough to earn your premium dollars.  If you pay attention to any financial news, you have heard about the numerous downgrades issued by firms like S&P and Moody’s.  Many of those downgrades have come in the insurance industry.  Granted, most of those downgrades dealt with carriers which deal in mostly life insurance, property and casualty firms were not immune.  Look for carriers with “A” ratings or better.  If possible, you want a carrier with a long track record of “A” ratings.

The final issue, which should not even be an issue, is the ability and probability of your insurance carrier to fulfill the obligations they have made to you.  I doubt that anyone could imagine a company like Nationwide not properly settling their insured’s claims, but evidently this is the case.  Unfortunately, there are not many places you can go to obtain information such as this.  Of course, there are web sites and BLOGs that talk about insurance carriers.  However, I have found most of the time these sites are administered by people who have been done wrong by a particular insurance carrier, thus the information may not be that objective.  My suggestions is to simply talk to your friends and family.  Ask around.  “Who is your insurance company?”  “Have you ever had a claim?”  “Were you satisfied with how your claim was handled?”

While we all want to save money whenever we can, when it comes to North Carolina’s Homeowners Insurance market, the carrier with the lowest price might not always be the best insurance carrier for you.

About the Author:  Jack Wingate is a Professional Insurance Advisor and Founder of ALLCHOICE Insurance in Greensboro, NC.  For more information about Jack Wingate, ALLCHOICE Insurance, or North Carolina Homeowners Insurance please visit: http://www.allchoiceinsurance.com

Insurance was originally designed as a tool to reduce the financial loss exposure of one party by distributing the risk across a large number of similar risks.  The insured party transfers the risk to a 3rd party in exchange for a set price, or premium.  The greater the exposure to loss that exists, the greater the price to transfer the risk.  Insurance Companies use statistical data to determine the likelihood of a loss for a particular risk, then charge the appropriate premium for the risk.  This price is termed as the “True Cost of Insurance” for a particular risk.

Once the “True Cost of Insurance” is determined, the insurance companies must then take into consideration their individual risk appetite for a particular risk, market conditions, and competition.  If the insurance company determines that a particular risk, or risk class, could be profitable over a period of time, then they adjust their pricing according to the competition that exists for that type of risk.  Effectively taking the “True Cost of Insurance” and reducing that price so that they will be competitive within that market.

Now that we have discussed some of the mechanics of Insurance, we can better understand the problems of the North Carolina Beach Plan and how those problems will affect every homeowner in North Carolina.  The Beach Plan was created as a market of last resort for property in the coastal counties of North Carolina.  Over the years, this market of last resort has turned into the Market of BEST Resort.  The reason this has happened can be traced back to one of the basic principles of insurance, charging an appropriate price for a particular risk.

The North Carolina Beach Plan is essentially a government agency.  While the Beach Plan employs people with insurance backgrounds, that does not mean the agency is qualified to act as an Insurance Company.  Given these facts, you can understand that those in charge of this plan may not be the best people to determine things such as appropriate underwriting guideline, appropriate balance sheet management, and most importantly approriate risk pricing.  In a nutshell, the Beach Plan provides coverage that is too good at a premium that is far too cheap.

I challenge you to go to any “standard” insurance company and have them “price” any individual risk within the 18 coastal counties, then compare that premium to what the Beach Plan charges for the same risk.  You will see the Beach Plan is typically 100%-200% cheaper than a standard insurance company.  As a consumer who owns coastal property, that works out well for you right now.  However, if you step back and look at that price difference, you have to believe there is something wrong with the pricing (either on the insurance company’s part or on the Beach Plan’s part).  Considering that if you were to get pricing from 10 different insurance companies, the pricing from all the insurance companies would all be considerably higher than that of the Beach Plan, would it be wise to assume that all the insurance carriers were wrong?  Or would a better deduction be that the Beach Plan was wrong?

Whatever you personally think, the insurance companies are in the business of pricing risks.  It would be safe to assume that a company that is in the business of pricing risk is better suited to price risks better than a government agency.

As a consumer, you still may be thinking, “I am able to get a better deal using the Beach Plan, good for me!”.  That is true until you consider that the Beach Plan does not have to appropriate reinsurance or reserves to pay the claims associated with the property they insure.  To put that into perspective, insurance companies would be unable to legally do business in North Carolina if they did not have the proper reinsurance and reserves to pay all their claims.  So, as you can see, there is a double standard present.

To compound the issue, since the Beach Plan is not functionally solvent, the burden to pay the claims they can not, is now shifted to every insurance company that provides property insurance in North Carolina.  A company will be assessed for the Beach Plan’s shortfall according to the companies North Carolina Market Share.

So what does this mean to the consumer?  Right now, the insurance companies have no means to recoup the assessment(s) they would incur.  It is safe to assume that losing money is the last thing any company wants to do!  So insurance companies will start charging more premium to all North Carolina Homeowners.  That in itself is not enough since North Carolina sets a maximum rate for risks in North Carolina.  That means that insurance companies must reduce their exposure by increasing underwriting requirements and slowing or stopping market share growth.  Some companies will even be forced to cancel all of their North Carolina exposures.

With companies increasing underwriting guidelines, increasing premiums, reducing exposure, and/or withdrawing from North Carolina; North Carolina Insurance consumers are now faced with an AVAILIBILITY issue versus a PRICING issue.  That’s right, there is a chance that you will not be able to get insurance from a standard carrier!  If you are lucky enough to qualify for a standard homeowner’s insurance plan, you will pay substantially more now than you would have 6 months to 1 year ago.

About The Author:  Jack Wingate is a Professional Insurance Advisor and Founder of ALLCHOICE Insurance.  For more information about Jack Wingate, ALLCHOICE Insurance, or North Carolina Homeowner’s Insurance, please visit http://www.allchoiceinsurance.com