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Martha Said:

Should homeowners insurance premiums increase due to automatic inflation clause?

We Answered:

Mbrcatz's response is right on point in terms of answering your question. I would only add an explanation of exactly how the automatic inflation clause works. Insurance companies do not use voodoo science to set the automatic inflation clause and do not directly use the assumed number of claims. The formula for the clause is set through the use of statistical information which is gathered through an analysis of construction costs in a given area or community -- construction costs include the cost of permits, demolition, debris removal, labor, materials, etc. In the majority of areas these costs have continued to increase. In some very rare areas the labor costs might have gone down because of depressed job markets but the costs still go up in other parts of the formula.

So for example the Market Value of the home might be going down in Cincinnati but according to the statistical data -- construction costs have increased 2% this year -- based on this the insurance company would increase your coverage A - Dwelling Coverage 2% thereby causing a small increase in the premium. One way to explain this would be that your coverage A was $100,000 and then when you apply the 2%, Coverage A will go up to $102,000 and result in an increase of $15 for the year. Your other Coverages B - F are also increased proportionately since these coverages are a percentage of Coverage A.

One of the reasons that this practice became standard in the industry is that many years ago when Hurricane Andrew hit in Florida, there were thousands upon thousands of policyholders were found not to have enough coverage to re-build and further suffered the insult of having the claim payment cut further by a co-insurance penalty which basically means that if you are under insured by say 30% -- the insurance company will apply a 30% penalty (deduction) in how much they will pay and then they also subtract your deductible. One of the reasons this occurred to that population was that for the most part the victims of Hurricane Andrew were older couples who owned their houses for many years and since they did not have an inflation guard and most policyholders don't just walk in and say -- oh you haven't increased by policy for a while so can we make sure we have enough coverage -- many of these policyholders were literally reduced to going back to work, refinancing their mortgages or depending on the government or charities to fill in the gap.

You are allowed to ask for a full review of the reconstruction cost of your home to make sure that you are not over insured but I can assure that that will probably not be the case.

The other suggestion I have is that you sit down with your agent -- consider increasing your deductible to $1,000 (I do not suggest a higher deductible because in most cases the percentage of discount is not worth the extra risk you are taking). Also make sure that you have your homeowners insurance with the same company that writes your automobile insurance as this is offers one of the largest discounts and then check if you are entitled to any other discounts. And feel free to check your rates with a couple of other companies while you are at it.

I hope this information helps. Good Luck

*** One more thing be very leery of some of the posters on this board that are noted as Top Contributors -- many of them are not even insurance professionals, i.e. either agents or company employees and they are strictly giving you their unprofessional opinions.

Kurt Said:

What state has the highest homeowners insurance premiums?

We Answered:

I'm guessing either Florida or Texas - as in, highest premium per dollar of coverage.

California and Hawaii have the highest priced homes, so those policies might have a higher dollar amount of coverage, leading to a higher premium.

Alex Said:

on my taxes, can I write off my homeowners insurance premium?

We Answered:

NO!

Stacey Said:

Can Homeowners Insurance Premuims be deducted on Taxes?

We Answered:

No, not on your personal residence. Only, if it is house you own and are renting out or are using to run a business in.

Cheryl Said:

Which company offers lowest premiums for homeowners insurance in Louisiana. I currently have Electric.?

We Answered:

The best way to find out is to use an insurance broker in your area. A broker works with several different insurance companies and can find the best rate for you. Brokers depend on referrals and a good reputation to stay in business, so they only work with good companies. There is no charge for the service and no obligation to buy. To find a broker, log on to a website like http://www.homeownerswiz.com and fill out a form requesting a quote. Your information will be sent (in seconds) to broker in your area who will contact you, usually the same day. Good luck!