Property damage from Hurricane Paloma on homes on the Brac last year.
With the economic downturn in full swing and the high cost of living, there is no doubt homeowners are looking at their property insurance rates with a critical eye. Especially in the last few years, homeowners have seen property rates step up more than they have gone down says industry experts.
“Over the past couple of years there has been a downward correction in rates from the immediate post-Ivan increases,” says Sagicor General vice president Michael Gayle.
But this decrease in rates has levelled off and it is likely there will be a modest increase in rates, primarily because reinsurance is expected to go up because of international financial turmoil and recent storms added Gayle.
Home improvements
But in spite of expected increases, one of the biggest things a homeowner can do to keep insurance rates down is to prevent hurricane damage with some improvements.
Installing hurricane-rated doors and windows as well as hurricane straps and a standing seam to the roof are costs that will easily pay for itself.
Another common improvement for a premium discount is putting up hurricane-rate shutters on all openings
If the home is still in the pre-construction stage then there are a couple options that can also translate into savings with insurance companies.
Since Cayman is a low lying island it is prone to flooding. Building the home six to eight above the existing ground level will go a long way to keep the house high and dry in the event of a storm surge or other causes of flooding explained Annette Jim of Island Heritage.
Property insurance companies will also give discount if the internal walls within the house are built out of concrete.
Deductible
In general, the standard deductible for property insurance is 3 per cent for inland and 5 per cent for waterfront. This means the homeowner pays the first 3 percent of the covered amount as an out of pocket expense before the insurance claim kicks in to the pay any damages above. For example, let’s say a house is covered for $200,000 then in the event of a major storm; the homeowner will pay the first $6000 in damages out of pocket before the insurance coverage kicks in.
But if the homeowner elects for a higher deductible rate, then the overall premium will be lower explained Jim.
“These discounts will vary from company-to-company and will depend on the risk features of the individual home being proposed for insurance,” said Jim.
At Sagicor General Insurance, if the deductible is raised from 3 to 5 per cent, the property is eligible for 7.5 per cent premium discount. If the rate is bumped up to 10 per cent deductible then the discount will also increase to 15 per cent.
Reinsurance factor
Insurance rates going up and down are always affected by reinsurance costs. Typically, these correspond to increased storm activity.
“The past 12 months has seen a different type of storm affecting reinsurers. I refer to the impact of problems in the capital markets. Most reinsurers have seen their capital bases eroded and are now seeking higher returns on their capital,” said Gayle.
Source: Caymanian Compass (June 21 2009)
