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Hurricane season brings renewed focus on home insurance

The hurricane season has been showing signs of getting underway in recent days in both the Atlantic and the Pacific, serving as a reminder to property owners about the importance of carrying sufficient home insurance policies.

One group working to educate the public about the importance of home insurance is the Property Casualty Insurers Association of America PCIAA), which recently provided some tips on preparing for possible storms this season.

Some of the tips include keeping insurance company contact information handy, as well as an inventory of household valuables, including photographs if possible. The group suggests the further precaution of sending such records to an out-of-state friend or relative’s home.

One especially important tip is for consumers to know exactly what their policies will and will not cover, and to know exactly how much a policy’s deductible is. According to the PCIAA, deductibles can be as high as 5 percent of a home’s total value in some coastal areas.

“While we cannot control when and where storms will hit, we can control how and where our homes are built. Mitigation awareness is the first step for loss prevention,” said the association’s Lyn Knauf.

After a storm, homeowners are advised to keep receipts of anything they spend on repairs or other needs, to make quick repairs to windows and doors to avoid further damage, and to avoid discarding damaged items until an adjuster has a chance to visit.

Home insurance is an increasingly important issue in parts of the country that are especially prone to major hurricanes and other severe weather events. For example, a recent report from NBC-17 in Raleigh, North Carolina focuses on legislation approved by state lawmakers that could potentially allow insurance companies to raise rates by as much as 10 percent if a hurricane causes more than $1 billion in damage.

The policy move was reportedly needed to ensure that insurance companies would actually be able to pay their customers’ claims in the event of a major storm. There was also concern about whether some insurers would continue doing business in the state without the changes.

“If we had a major storm right now, they wouldn’t be able to pay all those claims,” the television station quoted Kristin Milam, spokeswoman for the state insurance commissioner, as saying.

Another hurricane-prone state, Florida, has wrestled with similar issues in recent years due to a handful of especially expensive storms. A report in the Florida Times-Union says that a succession of storms in 2004 and 2005 helped contribute to a rise in home insurance premiums. At least one major insurer stopped doing business in the state soon after, due to uncertainty about how state officials would handle future home insurance issues.

The newspaper notes that the combined value of Florida property located in storm-prone coastal areas is $2 trillion, illustrating the high-stakes nature of protecting and insuring homes in such places.

“By far the dominant influence on the level of insurance losses … is the growth in coastal property value rather than the growth in the number of hurricanes in any given year,” the newspaper quoted John Rollins, of risk modeling company AIR Worldwide as saying.

So far, homeowners might be in for a moderate hurricane season in 2009, which would be a welcome break from the storms that made national news earlier this decade. Weather researchers have determined that El Nino conditions are currently in place in the Pacific Ocean, which tends to have a moderating influence on Atlantic hurricane season.

With that in mind, the National Oceanic and Atmospheric Association announced in August that there is now a 90 percent chance of a near or below normal hurricane season.

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Posted: August 11, 2009

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