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Homeowners insurance is increasingly poor value for money

You may have seen the news coverage of the increasingly severe storms over the last two years. According to the latest figures from the insurance industry, these more extreme weather events are growing more common. There was a record payout in 2010. In 2011, the number and value of claims rose and outstripped 2011. This year is looking as if it may break last year's record. According to the Consumer Federation of America, insurers have been moving aggressively to shift the burden of risk from themselves to you, the home owners. If you do not have enough money to deal with the emergency, you turn to the state and federal governments. All the financial assistance that comes back is taxpayers' money. That means the deficit continues to rise and the GOP has no plan to increase taxes to plug the gap. The only remedy, it seems, it finding cuts in government spending.

How are the insurers passing the risk? The two increasingly common methods are by unilaterally raising the deductible and by capping the amount payable in the event of a claim. The first time the insurance industry blamed storms for increasing the premium rate was Hurricane Andrew in 1992. That was followed by another increase in 2005. That was the year of Hurricane Katrina. After the last two years, everyone is looking to see what will happen following the tornado outbreak on Leap Day which left some 40 people dead and communities flattened. In all this, the fact you may not live in an area directly at risk is irrelevant. It all depends on how the insurer divides people into groups to spread the risk. It's not uncommon for people to be grouped without factoring in geography. That's why, for example, lat year's rates increased across Pennsylvania by an average of almost 6%. This is not the result of rising rebuilding costs. It's passing the cost of loss from the eastern seaboard counties to the rest of the state.

One of the more obvious places where you see this new hard-nosed attitude is in the treatment of guaranteed replacement policies. These were initially sold on the basis the money available would always rebuild. Now the insurers will only pay out to the stated maximum and leave it to you to find the rest. Insurers also look for reasons to refuse payment. So, for example, if you have been using a part of your property for a business use, this could be considered a nonconforming use under the local building code. Similarly, the insurers used to pay to reinstall the plumbing and electrical systems. Now, if the old system did not match the most recent code, the insurer will not pay to upgrade the system to conform. As the owner, it's left to you to pay for an improvement to the property. This makes it even more important for you to shop around. The majority of the Insurance Commissioners list the home insurance companies offering the best deals. Follow up on all the homeowners insurance quotes you get through online sites like this. This is not a time for loyalty for its own sake. Insurance companies are not giving you the best value. Now is a good time to change to a company that does give good value.

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