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Published: Thursday, 1/27/2005

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Property and casualty insurance has become a barrier to home

ownership and increasingly more expensive for residential as

well as commercial properties. It s an issue that has garnered the

interest of real estate professionals here in Ohio and throughout

the nation.

As you know, insurance is necessary to secure a mortgage, and

lenders require ongoing coverage. Without insurance, lenders

will not lend; without mortgages, the great majority of sales

transactions cannot be completed. Without continuing insurance

coverage, existing property owners cannot remain current on their

mortgage obligations and may fi nd themselves subject to expensive

lender forced-place coverage or possibly foreclosure.

Availability and affordability of insurance are critical to the

continued growth of home ownership and the real estate industry,

which has been the pillar of the economy. Home sales in Ohio and

nationally have reached record levels--with home ownership rates

shattering all-time highs.

Increases in insurance premiums are preventing some potential

home buyers from qualifying for a mortgage and buying a home;

current homeowners are also put in jeopardy by the increased

costs of insurance. The average cost of homeowners insurance

rose by about 8 percent in 2002 and jumped another 9 percent in

2003, and even higher in some states, according to the Insurance

Information Institute.

How prevalent is the insurance crisis?

Consider:

- Some buyers are getting coverage from alternative carriers not

regulated by insurance commissioners; such coverage is obtainable

only at very high rates.

- Owners of multifamily properties are facing lender demands for

additional insurance coverage, such as additional liability insurance

beyond what has been traditionally required.

- Some insurers are using new underwriting tools to limit risk; but

these new tools, such as credit-scoring and claims databases, are

being used unfairly to deny insurance to consumers.

- Despite the insurance industry claim that there is a statistical

correlation between credit and insurability, there is no statistical

research that proves a causal relationship between scores and

insurance claims.

- Insurers are using claims databases to deny coverage to individuals

and on properties for as few as one claim, regardless of

whether there was damage to a property or whether the damage

was caused by the insured. Most insurers will not write coverage

for a property with even one water damage claim. Such actions

have the potential to create a class of stigmatized properties.

The regulation of insurance is exclusively state law. However,

National Association of REALTORS has taken proactive steps to

address areas that are federally regulated and is working with state

and local REALTOR associations and outside experts to defi ne

appropriate responses at all levels.

NAR created an Insurance Task Force that made recommendations

covering the following areas: Expanding the variety of

insurance products; providing extensive technical assistance to

REALTORS ; educating members and consumers about the best

practices to deal successfully with the insurance problem; and

pursuing activities at the federal level to bring about increased

transparency to the underwriting process.

Additionally, the Ohio Association of REALTORS has convened

a group to study the issue of insurance coverage/availability in

the Buckeye State and will work at fi nding solutions to insurance

problems.

The following tips are offered to help consumers save

money and offset higher premiums:

Raise your deductible. Covering smaller losses could mean a

substantial saving on a homeowners insurance premium. Hiking

your deductible from the standard $250 to $500 could save you 12

percent, according to Insure.com, a consumer insurance website.

A $1,000 deductible can save you up to 24 percent, $2,500 can

mean a saving of up to 30 percent and a $5,000 deductible can

result in a savings of up to 37 percent. If you raise you deductible,

bank some of the premium savings so that you ll have the money

for minor home repairs.

Buy all insurance policies from the same company in order to

receive a multiple policy discount.

Avoid frivolous claims. Submitting a legitimate claim after years

of paying premiums is justifiable, but frequent claims may mark

you as a high risk. Consider paying for smaller losses to avoid

related premium surcharges or even the chance of nonrenewal.

Review your policy annually. Correct and/or update the information.

Double-check the information regarding how far your home

is from a water source such as fi re hydrant, as well as the location

of the nearest fi re station. If you carry an insurance endorsement

on an item that s depreciated, reduce or eliminate the endorsement

that covers it.

Although there are more cases of under-insuring rather than

over-insuring, make sure you land is not included in the amount of

insurance coverage you buy. Land is part of your home s market

value but does not need to be insured.

Stay with your insurer. Some insurers reduce premiums by 5

percent after three to fi ve years, and up to 10 percent if you remain

a policyholder longer.

Keep tabs of your credit. An Insurance Bureau Score (IBS) is a

snapshot of your insurance risk picture based on information in

your credit report. Some companies take insurance scores into

account when assessing a potential homeowners insurance risk.

IBS refl ects your credit payment patterns over time, with more

emphasis on recent information.

Ask about available discounts. Some companies provide

discounts typically in the 8 to 15 percent range for new construction,

since newer homes are built to updated building codes and

standards. Some insurers offer discounts for monitored home

security systems. As noted earlier, if you ve had your home insured

with the same company or agency for several years, you may also

be eligible for an additional premium discount.

To prevent losing coverage:

Protect your home against typical perils. By preventing losses

and claims, you can also help to keep the cost of insurance down.

These include: Keep fi re extinguishers in fi re-prone areas such as

the kitchen and laundry; Replace old, faulty wiring and make sure

to tell your insurer; Regularly check your roof, down spouts and

pipes for clogs or leaks; Discourage crime by using exterior lights

at night and dead bolt locks; Repair loose railings, steps or walks.

Avoid filing claims for small loses, such as those just above your

deductible.

As previously noted, on average a home owner files a claim once

every eight to 10 years. If you happen to fi le multiple claims within

a few years, you may be susceptible to being non renewed.

Educate yourself. Find out what Ohio s law is regarding home

insurance renewals. Contact the Ohio Department of Insurance at

(800) 86-1526 or on the Web at www.ohioinsurance.gov.

If you receive a nonrenewal or cancellation notice, take immediate

steps before the policy lapses. It s easier to fi nd another carrier

while you re still insured in the voluntary market. Obtain quotes

from at least three insurers so you can compare premiums and

coverage options. If you are having trouble fi nding coverage,

contact the Ohio FAIR (Fair Access to Insurance Requirements)

Plan. The Ohio FAIR Plan provides a variety of coverages, but at

higher premiums. Many FAIR policyholders obtain coverage on a

temporary basis in order to clear past claims histories or to buy

time in locating a private insurer. For more information on the Ohio

FAIR Plan, call (800) 282-1772.

If you have any concerns about insurance issues, ask a real estate

professional-a REALTOR with the Toledo Board of REALTORS for guidance. REALTORS are working hard to make your dreams of home ownership a reality.



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