There are many areas in the United States that are considered to be high risk by most homeowners insurance companies. These are the spots that are the first to be hit when a storm like Hurricane Katrina comes to town, areas that are prone to flooding and can see massive destruction in a very short amount of time in their wake. Needless to say, these aren’t areas that private insurers want to be responsible for! That’s why these states offer state insurance plans.
But these state insurance plans may be the final nail in the coffin of your homeowners insurance.
State and government insurance plans, like Texas’s TWIA (Texas Windstorm Insurance Association) or FEMA’s NFIP (National Flood Insurance Program) gather together the resources of taxpayers and local private insurers to help them cover the losses suffered when disasters like Katrina strike. Many people ask why these organizations exist when private homeowners insurance providers are already doing business in an area. The answer? Without state and governmental “last resort” insurance plans hundreds of our nation’s major urban centers would die out.
Think about it for a moment. Would you want to build your business in an area that was virtually guaranteed to suffer major losses every time something nasty blew through town? Especially if that area happens to be along the coast of the Gulf of Mexico, where hurricanes sweep through several times a year and most of the major storm damage for the past two or three decades has made the public media. Now imagine the prospect of setting up shop in an area like that knowing that none of the homeowners insurance companies in the area would compensate you for your losses.
Without a homeowners insurance policy to protect your commercial interests you may as well bid a fond farewell to any investment you make in that area.
It’s an unfortunate fact that private homeowners insurance providers reserve the right to deny coverage to anyone, for any reason. A virtual guarantee of multiple homeowners insurance claims being filed during the time you’re there would be an excellent reason to shy away! Homeowners and businesses in these high risk areas were unable to find a private insurer that would offer them the coverage they needed at a price they could afford.
State and federal governments stepped in, developing insurance associations like those mentioned above to help fill the gap and offer affordable insurance to those living and doing business in high risk areas. Cities like Galveston continued to boom instead of dying off. At the beginning, this “last resort” homeowners insurance solution was the panacea residents had been looking for.
Years later, however, homeowners insurance providers still feeling the sting of the string of storms that have swept in off the Atlantic over the past decade are becoming more cautious, extending their coverage only where they feel their investment is “safe” and driving homeowners and businesses in larger numbers to these state plans. The problem is, these state plans have very limited resources. If a storm were to actually wreck mass havoc in an area protected primarily by these governmental entities they might not have the money they need to make restitution.
And the security you count on your homeowners insurance to give you will be gone.
Anthony M. Peck is the Senior Developer, Software Project Manager, and Director of Business Development for QuoteScout.com, matching consumers with the best rate on their homeowners insurance. For more information, please visit them on the web at http://www.QuoteScout.com.