Those living in safe zones within the United States where weather-related damage is rare are probably unfamiliar with wind insurance. But, if you reside along South Carolina’s beautiful state coastlines, you have a pretty good idea what it is. Up until recently, the state-run program, which was designed primarily as a last-resort option to provide coverage to residents on the coast whose homeowners insurance policies didn’t include wind protection, was relatively popular. However, that popularity is beginning to fade.
Because many insurance companies on the private market didn’t offer protection from wind damage, the program was started as an alternative to homeowners to cover their coastal properties. Nevertheless, homeowners have started to leave the program. The main reason; insurance companies are finally beginning to offer wind protection. Of course, it’s not out of the goodness of their hearts that they’re doing it. Let’s face it, the motive is more of an effort to steer homeowners away from the wind pool insurance program and have them pay increased premiums for their existing coverage, with profit-minded insurers reaping the rewards.
In some cases, the wind protection being sold by these insurance companies is less costly than what residents along the coast are paying for the state’s program. By the end of May, 2014, the program claimed a total of 40,625 active policies, with $89 million in gross monthly premiums. That translates into a 14 percent drop in the number of policyholders reported in August, 2011, when, at last count, there had been a reported 47,366 policies, bringing in $97 million in premiums. And, the decline is apparently continuing.
It must be noted, however, that while there many homeowners experiencing savings by leaving the once popular state’s wind insurance program, those homeowners choosing to remain and receive coverage through the program, could find themselves affected by the growing departures. Simply put, as more residents exit the program and monthly premium revenues continue to decline, the result could mean raising the program’s premiums for those homeowners with active policies to compensate for possible financial shortfalls.
Although a decision to institute higher rates may resolve financial difficulties temporarily, it will inevitably drive away many of the homeowners still in the program, especially since insurers have begun reexamining their positions to provide coverage to certain substantially risky markets. You can’t necessarily blame insurers for being a little wary of providing wind insurance coverage to areas susceptible to extensive damage from major natural disasters, such as hurricanes, considering the ravaging of many of the East’s coastal regions in recent years.
But, using their access to research and various studies, insurers have become quite adept at gauging and weighing the risks, testing new management strategies by entering what were once considered “dangerous” markets. Time will tell if the decision to offer the wind insurance coverage for coastal properties is a wise one or a costly one for insurers. In the meantime, it will save homeowners money on their monthly premiums by allowing them the option of switching to the private market for coverage.
If saving money is important to you…make sure you’re getting the best rate on your homeowners insurance. Why not get a free homeowners insurance quote today?
Do you have wind insurance through your private insurer or the state’s program? Feel free to share your thoughts in the comments section below.