Who would have thunk it?

We're finally getting lower auto insurance rates in North Carolina! Yipee!  So is this cause for celebration?  Not really.  The final negotiated rate reduction is 0.5%.  Yep, one half of one percent.  Kind of a downer, huh?

So starting with policies renewing November 1st, you may see your North Carolina Auto Insurance rate come down, at least a little bit.  Did you catch that?  You rate MAY go down.  That's because the 0.5% reduction is an AVERAGE reduction.  Some might go up, some might go down.  Ugh, we can't catch a break here.

But that's not the good news anyway.  The really good news is that this rate reduction is RETROACTIVE back to January 1, 2009 meaning that if your insurance carrier decided to take a rate increase back then, you'll be getting a refund.

And that really is some good news.

So, you might want to compare the discovery of seedless watermelons with the 'fix' that our wise leaders in Raleigh came up with for the beach plan.  As in, we have seedless watermelons now - it's done, case closed, for now and forever, with no need to look back.

Not quite.

So what did they do to 'fix' the Beach Plan?  Let's take a closer look: 

1) Only $750,000 of coverage will be available to Beach Plan homes as compared to $1,500,000 before.

2) The home insurance companies will have to pay the first $1,000,000,000 (Billion) of excess hurricane damages.

3) After the first $1 billion in excess storm damages, ALL NC HOMEOWNERS ACROSS THE STATE WILL BE SURCHARGED 10% ON THEIR HOMEOWNERS INSURANCE.  So, yet again, the consumer is on the hook for the beach plan.

4) After that, the home insurance companies will pay the remaining excess damages.

So they essentially put a band-aid on the problem

Ok, so how bad could it be?  The beach plan has reserves of approximately $1.5 billion available to pay for hurricane losses.  However, a large storm could potentially wreak over $7 billion in damages, leaving over $5 billion in excess losses.

But that's the good news.  If we get hit by a SECOND or THIRD storm, ALL OF THE LOSSES ARE CONSIDERED EXCESS and we will end up with bankrupt home insurance carriers across the state.  Our home insurance market will closely resemble Florida's of a few years ago where there was one carrier - the state sponsored one.  And that isn't an environment that anyone looks forward to.

Cameron Bagherpour
Agent
Allstate Insurance
Cary, NC
919.460.0606

Since housing prices have dropped, I've been getting more and more inquiries from homeowners about whether they should lower the amount they insure their home for.  Great question.

The price that most homeowners see going down is the market value of their home.  The 'market' value of the home is really the value the house and land together can fetch if it were sold to a buyer on the open market.

On your insurance policy, your home is normally insured to its replacement cost.  This price is considered to be the amount it would cost to rebuild the home if it were to burn down to the ground.  Remember, home insurance does NOT insure the land, only the structure.

So as you can see, market value can be dramatically different from replacement cost, or the amount it would cost to rebuild the house.

A good example of the difference between market value and replacement cost is this: 

Take an average 2500 square foot home in Any-City, USA.  The market value of this home in Any-City is $350,000.  The replacement cost for this home is calculated to be $200,000. 
Now, imagine that same home being located in Any-Rural, USA.  The market value of that same home may now only be $250,000, but the replacement cost will remain the same at $200,000 because it would cost essentially the same to rebuild the home in a rural area.

So regardless of market value, if your insurance agent set your policy up correctly when you bought the insurance policy, you shouldn't need to reduce the insured amount of the home.  There are exceptions to this, so seek the advice of your insurance professional to address your unique situation.

It's about time!

Effective 1/1/09, all NC auto insurance policies are required to carry Uninsured +/or Underinsured Motorist (UM/UIM) coverage.  It was part of NC HB 738.

What does this mean to you and me?

Whatever your current Bodily Injury and Property Damage limits are on your auto insurance, your UM/UIM coverage must now meet or exceed those limits.  You're being required to protect yourself (um/uim) to the same degree that you're protecting others (liability).

If you weren't carrying um/uim before, you must carry it now.  You insurance carrier will automatically add it or increase it to match your liability limits.  And no, they don't need your approval or your signature.  Additionally, the cost of the UM/UIM coverage will go up as well.

I think this change is long overdue since as many as 1 in 5 North Carolinians drive without insurance.

Finally, the NC Department of Insurance has decided to take on the mounting financial problem facing North Carolina's Beach Plan.  A second major carrier has withdrawn from the home insurance market and more are getting ready to follow.  Our newly appointed, er, elected commissioner, Wayne Goodwyn vows to take the bull by the horns.  The problem is that the only solution entails raising premiums and lowering coverages.  Not good choices when you're an elected official.

But here's the good news: since the election is over, he can push through any unsavory elements and still have enough time before the next election to lower rates in other areas (like auto and non-coastal homes) in order to get re-elected.

Cameron Bagherpour
Agent
Allstate Insurance
919.460.0606
150 Cornerstone Dr. #202
Cary, NC 27519

Here' an update about North Carolina Auto Insurance rates.  The NC Rate Bureau has approved an 11% rate increase effective January 1st, 2009.  When your auto policy renews next year you will notice an increase in the rate unless you are with one of the few carriers that deviated from the rate (Allstate, Geico and a couple others) and kept their rates for the most part unchanged.

Now, if you have read my prior post about how the process works, you'll understand that this is just the way the insurance rates are established here in North Carolina.  The final rate change might be higher or lower than 11%, but we won't know until later next year.

Cameron Bagherpour
Agent
Allstate Insurance
919.460.0606
150 Cornerstone Dr. #202
Cary, NC 27519

This week, TWO FORTUNE 100 INSURANCE COMPANIES are out looking for capital to shore up their books.  Both companies suffered losses in their investment portfolios and now need cash infusions to remain solvent.  This is a pretty scary situation given that insurance companies are supposed to be the most risk-averse and conservative when it comes to investing their money.  I can't say this any more clearly: Make sure you look at the most recent financial rating of any insurance company you plan to purchase insurance from.  If they've been recently downgraded, that is a warning sign to all investors and customers.

I'll say it again: MAKE SURE YOU LOOK AT THE MOST RECENT FINANCIAL RATING OF ANY INSURANCE COMPANY YOU PLAN TO PURCHASE INSURANCE FROM.  They may not be there when the time comes to pay out claims.

Cameron Bagherpour
Insurance Agent
Cary, NC
919-460-0606

Trick or treating is a time honored tradition each October 31. But before homeowners open their doors to the witches and superheroes that live on their block, they should consider taking precautions to make their property as safe as possible for potential trick-or-treaters.

• Check your Outdoor Lighting: Make sure your property is adequately lit before trick-or-treaters arrive.
• Inspect Your Property: Make sure the path to your door is safe. Look for cracks in the sidewalk and loose stair railings. Remove any obstacles that can lead to a trip or fall.
• Watch the Decorations: Make sure Halloween decorations are not obscuring walkways and causing hazards. Use artificial lighting instead of candles to reduce the risk of fire-related accidents. If you do use candles, make sure you extinguish them before going to bed.
• Drive Carefully: With nearly 25 million families participating in trick-or-treating each year, neighborhood streets are going to be crowded. Use extra caution while driving and if you are planning to drive, steer clear of alcohol.
• Keep Your Pets Inside: Even if your dog enjoys the parade of children that arrives on your doorstep each year, the neighborhood children may not enjoy meeting your family pet.

Homeowners can be held liable should a trick-or-treater be injured on their property. Each October many invite neighborhood children onto their property and drive on crowded neighborhood streets. Everyone needs to be extra vigilant about safety during this time and make sure they have the right amount of insurance protection.

While a homeowners policy provides a level of liability protection, it may not be sufficient protection if injuries are severe. A personal umbrella policy (PUP) works with the homeowners and auto liability coverages and provides additional protection.

Additional benefits for homeowners who may be considering purchasing a PUP policy include: 

• You will not have to face court alone. If you are sued over an incident covered under your personal umbrella policy, Allstate will retain and pay for an attorney to represent you in court.
• Your coverage goes everywhere. So, you are covered no matter where you are, including outside the U.S.
• Helps with gaps in your coverage. Homeowners and auto policies do not cover certain types of incidents, like those alleging slander. But a personal umbrella policy helps provide protection for this kind of incident as well as others.
• Allstate pays on your behalf. In the event of a covered claim, you will not have to pay out of your own pocket first and submit for reimbursement.
• Reimbursement for lost wages. You will be reimbursed for the wages lost for your absence from work for a court appearance, up to the limits specified for this benefit in the policy.
  

More than 100 teens representing Mary E. Phillips, Enloe and Apex High Schools joined together for an Allstate Foundation Keep the Drive Summit and Rally on Tuesday, October 14, 2008. Keep the Drive Raleigh is a teen-to-teen movement to help students change the way they think and act in a car. It empowers teens to be smart driving activists among their peers. As one of 14 summits nationwide sponsored by The Allstate Foundation this year, the event encourages teens to help reduce the more than 5,000 teen deaths caused by car crashes each year. After the event, student leaders at Mary E. Phillips High School staged a rally to take on the No. 1 killer of teens and recruit fellow students to join them. These students left behind their mark on school grounds through a memorial to represent the teens that die each day in motor vehicle crashes, as well as banners and signs reminding their peers to drive smart.

Have you ever seen the series 'Planet in Peril' on CNN?  Well, we've got our very own perilous situation right here in North Carolina.  Our insurer of last resort along the coast, 'The Beach Plan' is in trouble.  A new independent study performed by The Property & Casualty Insurers Association of America finds that the Beach Plan is not financially prepared to handle even a single severe storm.

What does this have to do with you?  Well, nothing if you don't live in North Carolina.  But if you are lucky enough to call The Old North State home, then it has a lot to do with you, especially if you own a home here.

The problem is overexposure to risk and underfunded catastrophic reserves.  The Beach Plan insures about $70 Billion in property and is growing by $1 Billion every month.

According to their own records, the Beach Plan has about $1.5 Billion in reserves while a severe storm could easily cost over $7 Billion.

So I'm sure you're wondering where the other $5.5 Billion will come from.  Well, when there's a shortfall, the plan is designed to spread risk among all the private homeowner insurers throughout the state - even among those that are smart enough not to insure homes along the coast.  That means that in the event of a major storm, many homeowner insurance companies will go out of business.  There is no disputing this fact.

Companies are scared.  Scared enough to pull out of the state altogether, as we've seen with Farmer's Insurance this past year. Scared enough to raise rates statewide, as most major carriers have already done this year.

ALL NORTH CAROLINA HOMEOWNERS are being forced to pay higher insurance premiums because of the Beach Plan's exposure along the coast.  NC homeowners are paying to insure coastal properties even if they don't own property on the coast.

We have about 8 more months to get this worked out before our next hurricane season, and remember, we get a chance to elect a new Insurance Commissioner this year - make sure your vote counts!