Many homeowners over the last few years have seen large increases on their home insurance rates.
In many cases home insurance rates have increased two to three times.
As an independent insurance agent, I can remember the average rates on homeowners being $400 - $500 a year.
I also remember being embarrassed if I had to tell a potential client that the cheapest insurance quote that I could offer on their home was $700 or $800 a year.
Wow how things have changed in less then ten years.
Many are asking why, while others just assume it's simply the insurance companies increasing their rates to increase their overall profit.
The truth is that most insurance companies are struggling to make a profit in the homeowners market.
I have spoken personally to different insurance companies who are paying out anywhere from $1.
28 to $1.
35 for every dollar of premium that they receive.
These numbers are a combination of the companies expenses to do business, the increase of catastrophic claims and lower returns on their investments.
Unfortunately if the trend of homeowners rates increasing doesn't change, I believe that we will see something similar to what is currently happening in health insurance.
I will even go out on a limb and predict that within five years homeowners insurance will take center stage in the political arena.
Saving money on homeowners insurance is going to require consumers to consider sharing a bigger share of the risk.
The time of the average deductibles being $250 will be replaced with higher deductibles ranging anywhere from $1,000 to $2,500.
Consumers may have to consider doing away with the bells and whistles types of coverage.
These are endorsements on a homeowner policy that cover things such as lock replacement, mortgage extra expense, back up of sewer and drains, refrigerated products, debris removal, etc.
In order to fix the problem companies and consumers are going to have to work together.
Saving money on homeowners insurance and fixing the problem is going to require changes not only on the behalf of the insurance companies but also the consumers.
Insurance companies are going to have to do a better job of underwriting.
This may not sound great to every consumer but remember for everyone who does not have claims there are those who are driving up the rates with multiple claims.
Consumers are going to have to consider higher deductibles, taking a more active role in loss prevention and not turning in smaller claims.