First of Several . . . Murky World of Homeowner’s Insurance

Editor’s Note: Michael Causey, the North Carolina Insurance Commissioner, recently denied the NC Rate Bureau request for large premium increases for homeowner’s insurance that were proposed to take effect in August 2024. There will be a hearing on October 7, 2024 unless there is a negotiation that takes place before August 1, 2024. Over the next several weeks, Compass contributor Gordon Allison tackles this topic!

Here is a short review of how insurance is supposed to work. The guiding principle of insurance is that the loss risk is spread as far and wide as possible. That is, the more insurance customers there are for a particular loss, the less each insured party will have to pay as his premium for that category of loss. But, if that category of insurance has a major or sustained loss record, the insurance company will want to raise the premium for that type of loss. If you were wealthy and could cover your losses out of your own pocket, you could get by without insurance. However, if you have a mortgage on your home, your lender may require the insurance to protect the loan, or you could purchase a bond to cover the loss for the lender, assuming that is acceptable with the loan agency.

Your homeowner’s insurance company in North Carolina rates your home on where in the state it is located, how it is constructed, how high it is above the water level, what the wind zone is at that location, the availability of a fire department close by, how capable the fire department may be. Is there a nearby fire hydrant? Does your home have a sprinkler system? Do you have smoke detectors or an alarm system? Does the roof have a fire rating? Is the home made of impenetrable materials? Does the home have a 120+ mph wind rating? Caution: some insurance companies do not necessarily have discounts for each of the items listed above.

In the case of flood insurance, the US Government administers the coverage thru FEMA. This is separate coverage from your homeowner’s policy. When my wife and I moved here in 2014, we looked for property that was well above the height of flooding and possible damage by tidal waves. The average elevation of Pamlico County is FIVE feet above sea level. This is why the damage in Pamlico from Hurricane FLORENCE in 2018 was so bad.