Home Insurance Braces for Wildfires Claims

Posted on 28th September 2011 in Articles

The year 2011 has been one for record natural disasters. The Texas wildfires currently raging are already causing never-before-seen damage in the state to forests, animal habitats, and human homes. This damage continues hurting even after the fires are done. The only thing protecting homeowners in the 25 thousand scorched acres is insurance.
Big disasters can be huge tests of the viability of an insurance company. Make sure your insurer is up to the test.

Damage from Wildfires

Wildfires have always been a problem in the Southwest and always will be, if climate change doesn’t turn it into a tropical zone. The problem will likely only get worse as more of the precious few water resources are tapped out in Texas and other border states.
Wildfires can start from almost anything, whether it be spontaneous combustion from the sun or a cigarette tossed into the woods. The key is parched woodland from lack of rain, intense sunlight, and heat. Once a fire gets going, it’s very hard to stop. Part of the reason is the incredible amount of fuel available – so many trees – and another part is the inability to predict which way it goes. Fires spread by wind to anywhere where a flame or even an ember can blow.
In this Texas wildfire, 500 homes are already been destroyed in the conflagration, with no end in sight. The 25 thousand acres of land affected could double or triple before this is over, the fire department says.

Wildfire Coverage

Homeowners living near wooded areas don’t really have much protection against wildfires. Sure, they can put flame retardant in their homes and clear brush away, but if there is a raging inferno like this one, cheap homeowners insurance is the best you can do.
While most homeowners policies have some coverage for fire damage, it might not be enough to really protect against the threat that a full-blown wildfire poses. In the United States as a whole, there is a 10% chance that any given home will be damaged by a fire at some point over 30 years, so it is important that homes in all states have some protection. The following states, however, should get more fire coverage:
Alabama, Arizona, California, Florida, Georgia, Mississippi, North Carolina, Oklahoma, South Carolina, Texas

Texas home insurance Provider Up to the Task?

A reassuring sign of the people of Texas is that the insurance providers are out in force. Many of the companies have sent agents to the affected areas in vans or even temporary housing to help homeowners with claims. State Farm in Central Texas has already filed 210 claims.
Not all providers will be ready, however, as some might not be able to afford the claims. Make sure your insurance provider is up to the financial task by checking their financial health with Standard&Poor’s or another ratings agency.

Be Prepared

If you haven’t already, get good fire damage coverage on your homeowners insurance. Even if you are in Texas, it might not be too late.
You should also have your paperwork ready for disaster to strike. In case the fire should arrive near you, be ready to leave with all the necessary items, including a copy of your policy and proof of the most expensive items in your home.

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The ZIP code debate

Posted on 28th September 2011 in Articles

To understand the issues, let’s start with a quick tour of ZIP codes. They are used by the US Postal Service to sort the mail faster. Once sorted, bundles of mail are delivered by staff who know the ground. This plan was not devised to help set insurance rates. Indeed, when you look at the boundaries on a map, you see how arbitrary they are, often lumping completely different groups of people together regardless of social class or property value. Basing the calculation of premium rates can therefore look unfair in urban areas where, on one street all vehicles can be parked off the road in locked garages overnight whereas, round the corner, the quality of the neighborhood just changed for the worse and crime affecting vehicles parked on the roads is rampant. Imagine how people who have lived on that second street feel. They have been paying their premiums for years and now must suddenly pay more because they have no choice but to stay – sadly, with the collapse of the housing market, it’s no longer easy to sell and move to a “better” area. In other words, basing the premium rate on the address rather than the safety record of the driver looks unfair.

Let’s now move over to Milwaukee where State Senator Tim Carpenter has introduced State Bill 289 to prohibit insurers from relying on ZIP codes to set premium rates. This is yet another attempt to repeat the success in California where, in 2008, John Garamendi, the Commissioner for Insurance, finally pushed through the regulations to reduce the insurers’ reliance on ZIP codes. Note the regulations do not outlaw the practice. The Californian insurers can still use the ZIP codes as one of the factors when setting the rates. But the codes can no longer be one of the “main” factors. Why not outlaw it altogether?

The answer depends on the difference between the insurance policies. Liability cover pays out to any third parties we may injure through our bad driving. This can be and, for the most part, is based on our individual safety record as drivers. Where we live is never going to be terribly relevant to where we drive once the vehicle is in motion. The problem comes with collision and comprehensive cover. Both types pay out to you if your vehicle is damaged in a collision, by a vandal or by a tornado. Where you park your vehicle must therefore be an important factor in deciding the risk you might get hit. Similarly, the local crime rate when it comes to vandalism is as relevant as whether you live in an area frequently hit by tornadoes, floods, landslides, etc.

So, comparing these different policies, you might find cheap car insurance if all you want is the minimum liability cover. Where you live is always going to be less important. But when you move on to collision or comprehensive cover, where you live become far more important. For this reason, Tim Carpenter’s bill is going to struggle in Wisconsin. Although the insurers there are exaggerating when they say this bill will mark the end of cheap car insurance, only a compromise between the state and the insurers will produce a fair outcome.

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Driving courses for seniors

Posted on 15th September 2011 in Articles

It’s a fact of life that, as we age, our bodies slow down. The reflexes we relied to get us out of trouble are no longer so sharp. Worse, the eyes of a hawk that helped us spot danger on the horizon now need spectacles. We can still see but, with reaction times slowed, the risk of accidents increases. Yet, because public transport remains so poor, particularly in the rural areas, we need to continue driving. It’s what keeps us independent. Everyone wants to stay behind the wheel of a car for as long as possible.

The national statistics show insurance is cheap up to the age of 55. Then insurers begin increasing the rates. It’s a slow increase at first, but once you cross 65, the premium hikes are more real. If you want to continue driving after 75, the rates start to match those charged to teens. This reflects the accident rates. Although the damage tends to be less because we all drive more slowly as we get older, most insurers prefer us not to drive at peak times. Hence, there are discounts for low mileage during limited hours of daylight.

The most common discounts are offered to older drivers who go through defensive driving courses. This would be a genuine gesture toward improving safety on the roads if all the courses were behind a wheel. Unfortunately, insurers are currently prepared to accept online courses as satisfying the requirements. This means you can get a discount simply by logging time in front of a computer screen. Most of these courses take between four and eight hours to work through with the most popular being offered by the AARP. There are two major problems with this.

First, there’s no check on the identity of the person sitting in front of the screen. No doubt there are grandchildren with the right skills who will work through the courses for a few dollars. This lack of security makes a nonsense of the discount requirement if it’s intended to promote real safety. Yet, this is the way insurers currently work. The second problem is about learning outcomes. Ask anyone who’s studied education theory and they will tell you people who study practical skills using books or online materials, rarely benefit. The only way to learn a practical skill is by doing and receiving immediate feedback on performance. Older people are more set in their ways and it takes longer for them to change their behavior. Only by sitting with an instructor in a car can seniors be given the level of training necessary to change the way they drive. Except this is relatively expensive.

At present, twenty-eight states have special licensing requirements for older drivers, i.e. renewing the license more frequently or taking a driving test. For now, you can save money by going through online driving courses, typically up to 15%. Talk with the insurers when you get the next set of car insurance quotes. With online courses cheap, savings often exceed $100 a year. But, if you want to be a better driver, pay the extra for one-to-one tuition behind the wheel. You know you should. Cheap car insurance should be about more than you paying less.

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Make driving safer

Posted on 13th September 2011 in Articles

Let’s go back to basics on insurance. It works because those clever actuaries estimate how much money will be required to pay out all the claims over the next year and then divide that amount by the number of policyholders. It’s called the cost of loss. To that they add a percentage to cover the administrative expenses and a profit. If the estimates are right, everyone is happy. Now suppose we could do something to reduce the cost of loss. That would mean a smaller share for all of us to pay and happier people. It’s just common sense we would want to do everything in our power to make driving safer, right? Well, it seems not everyone is in favor.

Take the question of road design. To anyone interested in statistics, one of the most dangerous places to drive is junctions and intersections. That’s why we have stop lights to show who has right of way. Except that’s not actually the safest design. The roundabout is the safest way of regulating traffic flow. You keep everyone moving in the same direction. The Federal Highway Administration has been compiling some good research data. Wherever roundabouts have been installed, accidents have dropped by 40%. In the busiest intersections, adding peak-time stop lights reduces the accident rate even lower. Yet even though this is an ideal way of preventing accidents, a lot of drivers object. It’s the same when it comes to red light cameras. More than one-hundred thousand people are injured every year by drivers coming through on red. Yet, shouting about invasion of privacy, some counties are now removing the cameras. It seems local politics beats positive measures to reduce injuries and save us money through lower premiums.

Then there’s the issue of speed limits. On the roads in every country, the moment you force people to drive more slowly, there are fewer accidents. Our country used to have a national maximum limit of 55 mph but, in 1995, Congress canceled it and delegated the issue of speed limits to state lawmakers. Now you find different limits on roads in every state. Trust us to resist the idea of any federal laws telling us what to do. It’s the same with the age at which our children can be licensed to drive. All the states that hold off until seventeen have accident rates 30% lower than in states where children can drive at 16. The STANDUP Act (Safe Teen and Novice Driver Uniform Protection Act) is to be reintroduced in Congress. Hopefully it will do better than last year. There’s a similar move to force all states to enforce a ban on drinking and driving under 21. Left to well-informed lawmakers, there would be a zero tolerance approach to all drink driving. Sadly, politicians feel they will lose elections by supporting such measures.

These are simple measures to make our roads safer. In turn, they would reduce the car insurance quotes. But few politicians are prepared to take a stand on anything that interferes with the rights of the driver. The gun lobby is stronger, but lawmakers fear a voter backlash if they make the active policing of the roads a major policy priority. Lower car insurance rates don’t win elections.

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Preparing for bad weather

Posted on 13th September 2011 in Articles

You may have noticed Hurricane Irene which has broken records for a hurricane hitting land and working its way up the Atlantic Coast. This has not happened for a good few years and even though Irene was downgraded to a topical storm, it’s contrived to dump an amazing amount of water on to one of the most densely populated parts of America. The immediate estimates are that this will be a top ten natural disaster with billions in claims on auto and home insurance policies. When all the numbers are added up at the end of 2011, experts are predicting this will be one of the worst on record for the insurance industry. A M Best, which monitors the insurance industry, recently announced the payouts so far this year have already exceeded the amount paid last year. Last year was expensive. When you add the two years together, it’s likely the insurance industry will run out of cash reserves later this year. This will force it to borrow and erode its capital base, assuming of course there are banks or investors prepared to advance more money. No matter what happens in the stock exchanges or on Wall Street, premium rates will have to rise.

This gives everyone a big incentive to avoid making a claim. Although an increase in premium installments is not automatic after a claim, it’s better not to take chances. So what do you do if your local weather forecasters start warning of big problems? The first and most straightforward advice is not to drive during really bad weather. No matter how well prepared you are, it’s just not worth the risk unless there’s an emergency that forces you to make the attempt. So start with the vehicle itself. You need the best possible grip on the road so having tires with the maximum tread is best. If snow is going to be the problem, consider having chains to fit should you encounter drifts. In winter, the real problems come with ice. In wet weather, the problem is aquaplaning if you drive too fast. The first you know of either problem is when you discover you have lost contact with the road. Should you have time, take your foot off the gas and hope engine compression slows you enough to recover control before you hit something. Remember before you drive into flood water, there’s always a risk of hitting a submerged object. If in doubt, don’t drive into more than a few inches of water. Keep replacing your windshield wipers to ensure the best possible view of the road.

Always carry emergency supplies with you. You need a charger to keep your cell phone working, and either warm clothes or blankets to keep you warm while you wait for rescue. Remember emergency services will be slow to reach you if the weather is bad across large areas. Follow these simple rules and you should survive. More importantly, if your vehicle is undamaged, next year’s car insurance quotes should come in lower than you expect. But the advice remains the same. Don’t drive unless there’s no choice. If you are warned of a hurricane, evacuate early to high ground to avoid flooding. It’s all common sense to avoid higher car insurance rates next year.

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