Commercial Property Insurance Continues to Rise

Think about all of the factors that are taken into account when the costs of any property insurance premiums are considered. Of course, the main worry of any insurance provider is the amount of risk they are undertaking when it comes to granting a policy; the more risky the policy is, the more costly the policy is going to be. This is the way the insurance industry operates and it has been this way for some time now.

Ever since the attacks on the World Trade Center on September 11, 2001 the cost of commercial property insurance has begun to scale upward. Other world events have not made this situation any better, including Hurricane Rita and the even more devastating Hurricane Katrina. It seems that commercial property insurance is not nearly as solid of an investment factor as it has been in the past. This is reflected in the ever-increasing insurance premium, which creates a problem in the industry. After all, having commercial property insurance is necessary, no matter what the cost. Commercial property loans are never granted without the property insurance coverage and this has created a bit of a dilemma in the economy.

However, the fact that commercial property insurance has continued to rise has made it rather difficult on the business world, as policies are being up-charged, changed, canceled, and modified beyond the needs of the average insured.

About the Terrorism Risk Insurance Extension Act:

Also known as TRIEA, the Terrorism Risk Insurance Extension Act has provided a sort of gap insurance coverage for property owners who found it necessary to obtain insurance against acts of terror on their properties. This is important, as many insurance companies find it difficult to provide insurance for such a high-risk peril, and it is important for both mortgage and loan companies and property owners to be insured against all possible acts or perils.

At the end of 2007, a vital change will be taking place; the Terrorism Risk Insurance Extension Act will expire, changing the face of the post-911 insurance industry forever. It was put in place because there was a new niche for insurance that could not be covered, that of the risk of terrorism. For this reason, Congress is re-evaluating legislation regarding insurance, including the validity and necessity of the Terrorism Risk Insurance Act.

Having a federal terrorism insurance policy in place is important because without it, private commercial property insurance is hardly affordable, creating an economic dilemma. In certain areas of the United States, the possibility of affording adequate commercial property insurance coverage would be drastically reduced, thereby creating problems in the business world and possibly leading to a severe economic slow-down.

Anybody remotely involved in the real estate industry should understand what a vital role property insurance plays in the real estate market. In the same sense, having a healthy real estate market is vital to having a healthy economy.

There is virtually none without the other, and for this reason real estate agencies and the CCIM are urging legislators to make a federal program available of some kind, many of them hoping to keep the Terrorism Risk Insurance Extension Act in place to cover damages to property that result from any acts of terrorism or any damage resulting from foreign attacks or other acts of war.

As of right now, the future of the Terrorism Risk Insurance Extension Act is at stake. Active members of the real estate community are going to be forced to act now, or risk having the federal catastrophic insurance plan revoked, causing definite problems both now and in the immediate future.

It is up to Congress and the Bush Administration to decide whether or not TRIEA will be re-enacted, and that will determine the future of the health of the real estate market in the United States. It is the hope of many that legislators will be able to see the importance of such federal insurance plans in the real estate industry, and the importance in the overall United States economy.

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Post-Katrina Role Of Property Insurers Threaten Consumers Nationwide

“Prediction is very hard, especially when it’s about the future.” Yogi Berra

Given the focus on the recent one-year anniversary of Hurricane Katrina by the media and government officials and its label as the most costly catastrophic disaster in United States history, there has been little focus on the nationwide impact the property and casualty insurance industry has started to impart on homeowners and businesses in a post-Katrina world.

There has been serious discussion about reforming U.S. insurance laws in the U.S. Congress since 2004, before four hurricanes battered the Florida coast and well before the Katrina and Rita storms hit the Gulf Coast in 2005. However, the insurance industry since Katrina is now not only fighting hundreds of individual and class action lawsuits in Mississippi and Louisiana in the wind v. water debate, but also advocating change in the event of future catastrophic events.

The McCarran-Ferguson Act, enacted in 1945, delegated sole enforcement of insurance regulations to the states, where it was believed better oversight would take place rather than federal government mechanisms. However, state regulators are not law enforcement agencies and do not have the benefit of the arm of the federal government in cases which are beyond their means. Now, many state insurance commissioners, members of the Congress as well as consumer advocacy agencies believe that the whittling away of consumer protections over the years and recent staggering premium hikes, with little public disclosure, builds a case for federal insurance legislation and industry reforms.

Since 1945 the insurance industry has enjoyed an antitrust exemption and the viability of that rule has been seriously discussed and revisited by the Congress. There have been state accusations of price fixing and price gouging along with collusion in the industry leaving consumers with little information about their homeowners and business property policies, with only the civil or criminal courts left for recourse. It is argued that the antitrust exemption only fuels such a scenario.

The proposed National Insurance Act of 2006 (S.B. 5209) introduced by the Senate Banking Committee on July 11, 2006, would allow insurers to be licensed under a federal umbrella license, to choose between federal or state regulation and to do business in any state without need of state licenses. The U.S. Department of the Treasury would then have jurisdiction to regulate such national insurers. Arguments against such an arrangement cite more endless bureaucracy and red tape with fears that individual states would not be equally treated.

Alternatively, the State Modernization and Regulatory Transparency (SMART) Act introduced in 2004 addresses market conduct, licensing and antifraud data exchanges but has failed numerous times to move through the legislative process. It would leave regulation up to the states but to comply with uniform standards without federal oversight. The attempt to “modernize” the regulatory framework of the insurance industry has become synonymous with deregulation and appears that resistance on both sides of the argument makes reform more and more insurmountable along with immense struggles to provide sufficient delivery of adequate insurance for property owners.

The repeal of the McCarran-Ferguson Act has also caught the attention of the Senate Judiciary Committee which held a hearing on the issue on June 27, 2006 for the first time since 1994, precipitated by numerous complaints of less and less public disclosure of information and devices used for premium calculations. Such has impeded consumers from making a proper decision when purchasing policies. Travis Plunkett of the Consumer Federation of America (CFA) testified that “Insurers want competition alone to determine rates, they say. How about a repeal of the McCarran-Ferguson Act to test their desire to compete under the same rules as normal American businesses?”

The CFA has also called for regulation to ensure consumers have availability of enough information in order to compare pricing of policies between insurers in order to make informed decisions. Unlike the way most consumer service products are purchased, insurance costs are based upon a non-finite uncertain condition to happen some time in the future. And consumers must rely solely upon the agent, especially when actuarial tables and insurance models are non-accessible. Thus, more scrutiny not less has been called for.

But deregulation has also brought about insurance products sold worldwide as investments and annuities and reinsurance companies which provide catastrophic coverage for domestic insurers primarily are located overseas. Therefore, in a global economy, federal oversight is far more necessary than in the past. Leaving global oversight up to state regulators is arguably negligent given the ramifications of lack of coverage during a catastrophe.

The insurance industry itself has been campaigning for some type of legislative reform to provide for a federal catastrophic fund which would subsidize insurers in cases of terrorism and natural catastrophes. The American taxpayer and consumer have gotten their fill of that, however, where the Federal Emergency Management Agency (FEMA) has been and continues to pay out damages to the Gulf Coast states and primarily the City of New Orleans for rebuilding costs, with FEMA’s National Flood Insurance Program (NFIP) to homeowners and businesses and for FEMA housing costs for the displaced.

But an unexpected phenomenon followed the 2005 hurricane season and is primarily fueling the fires for insurance reform and that is the record high premium rate hikes on homeowners as well as commercial property policies. In addition, hundreds of thousands of policies are being dropped and non-renewed by the country’s two largest insurance companies, namely State Farm Insurance Co. and Allstate Insurance Co., from the Gulf Coast all the way up to the tip of Maine.

Even more unexpected, however, were renewal denials for inland properties for policyholders in the Northeast including New York City, where property owners have never even previously filed a claim for property damage. With premiums on the Gulf Coast having at least doubled since 2005, thousands of dollars have been added to mortgage loans. In some cases, many homeowners policies were not renewed at all, preventing homeowners from obtaining mortgages or rebuilding at all.

With insurers’ withdrawal from writing homeowners policies throughout regions of the U.S. and gutting those with less and less coverage for those in place, the industry believes it will be able to stay healthy. Astonishingly, in 2005 it made a record profit of $45 billion post-Katrina and after four storms in 2004 it realized a profit of $38 billion.

The models associated with risk management amongst insurers are also changing. The 100-year average of history for forecasting future hurricanes, for example, is presently being revised. And as those methods of calculations become murkier, homeowners can hardly feel safe or comfortable when purchasing new properties. There are also several states which only allow for the issuance of property insurance based solely upon a consumer’s credit history and income which makes it far more difficult for the working class consumer to be able to purchase insurance.

Over the next year, 43% of the U.S. population which covers 18 states can expect their policies to either be dropped by their insurance carriers or have their premiums escalate between 20% and 100%. And for that reason alone it might be time to reel in an industry which not only is in business to make a profit, but also has a moral obligation to help protect communities nationwide and such becomes necessary in the face of absolute destruction.

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Federal Government Entices Lenders to Lower Your Mortgage Balance

Today is a new day for borrowers in danger of losing their homes to foreclosure. Today is the first day that the Housing and Economic Recovery Act of 2008 goes into effect. This act was designed to motivate lenders to work with the consumers in keeping their homes. In the past, despite the current economic crisis many lenders have found themselves in, they have not been so willing to work with the borrowers to help them keep their homes from foreclosing. That all hopefully stops today with HERA.

As the government recognizes the enormous load of future foreclosures that are coming and the repercussions that brings to our economy they have decided to step up to the plate. According to HERA (Housing and Economic Recovery Act) the Federal Government will now be insuring all new, reduced 30 yr fixed mortgages in attempts to motivate lenders to reduce struggling borrower’s loan amounts of up to 90% of the property value. In other words, the bank slashes your mortgage amount in half, you get to keep your home, lower the mortgage payment and in return the bank saves itself from not only the whole costly foreclosure process but now has a federally insured loan and a paying customer. It’s a win-win for everyone.

Though it would be ideal, not everyone is eligible for this perk of HERA. In order to qualify you cannot have been convicted of fraud, certify that you have not intentionally defaulted on an existing mortgage and did not obtain the loan fraudulently (you wouldn’t believe how many borrowers fudged their applications to get a loan), your mortgage payment must exceed 31% of your monthly income as of March 01, 2008 and last but not least you must occupy the home as a primary residence and the home must be listed as so. Sorry second homeowners and investors but you don’t make the cut!

You should know that lenders are NOT required to participate in this program though it would be in their best interest to do so. Another important factor to understand is that if your lender does agree to this and your loan amount is reduced you are not allowed to take any second mortgages within the first five years. You must also split 50% of your equity with FHA when you sell it and there is holding period of which I am not aware of how long. Not a bad trade-off if you ask me.

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Tips on How to Compare Federal Insurance Programs

More often than not, federal financial institutions dominate insurance categories, with some operating as the single providers for an insurance category. Different insurance programs are offered by several federal units such, including programs within federal corporations and independent agencies. One such insurance policy offered by federal entities is long term care insurance.

What is long term care insurance? And is getting such an insurance policy really necessary? Long term care refers to care that one might need if he becomes unable to perform ordinary day to day activities. Reasons for being unable to do so may include injuries, disabilities, chronic illnesses, and aging. This also includes the supervision one may need if he has been impaired by a disease such as Alzheimer’s. Long term care refers to the provision of constant care that may extend over several years. Long term care insurance is used to pay for the expenses incurred in this type of set-up.

If you have decided to purchase insurance, you have the option of buying an individual plan or a federal long term care insurance program. One of the main issues pertaining to federal insurance program, and this applies to most insurance programs offered by the federal agencies, is its availability. It is not open for everyone. Some individuals who may avail of federal insurance programs are federal employees, members of the uniformed services, and retired employees. Relatives of said individuals who qualify for the program are also entitled.

Here are some things you may need to look into when comparing this type of federal insurance program with one provided by an independent company:

– Most insurance companies can provide substantial discounts if an individual applies for the insurance policy together with his spouse or partner.
– For privately owned insurance companies, the benefits provided by their policy can be modified to fit an individual’s financial circumstances. Generally, policies offered by private insurance companies provide more extensive coverage for far less cost.
– Federal insurance programs sometimes come at a higher cost and, at times, enact penalties on home health care benefits.
– Programs from private insurance companies provide better benefits for more affordable rates.

Going for long term care insurance is a good way to protect oneself and his family should the need for constant care arise. In purchasing a plan, one should look into the price, the benefits, and also go over the implications that are brought on by the company who offers the plan.

It is important to compare insurance quotes before getting signed up with an insurance policy. When you compare insurance quotes you can rest assured you are saving both time and money because you are guaranteed to get the lowest insurance quote.

Given the current recession it is important to make sure to prioritize your money and compare insurance quotes online. A good place to state would be an online website that actually allows you to compare insurance quotes online for free.

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Tips on Buying Insurance Cover For Floods

The definition of a flood is water overflowing from an expanse of water that will cover a large area of land that is usually dry. There are an incredible number of causes of floods, from intense rainfall from both ordinary storms, hurricanes, tropical storms and tsunamis to drainage obstructions such as breaking dams, landslides or glaciers, and even man-made causes such as overgrazing, overcultivation, improper disposal of waste, deforestation or poor water management.

Rivers or lakes that overflow their bounds or burst through levees may also cause floods. A lot of damage occurs to buildings, roads, houses, and people when water floods land. Floods are difficult to predict and tend to linger for long periods of time. Working to recover from a flood and all the related damage is an exhausting and emotional experience for most homeowners. Dealing with property damaged in a flood can be costly, even more so if it didn’t have flood insurance.

If you own or plan on owning property, flood insurance should be one of the most important considerations that you have in your mind; especially if you check your property on the hundred year flood plan. Floods can happen in non coastal areas and not near a body of water. Floods can happen anywhere, which means that everyone is at risk. It is critical that you be aware that homeowner insurance plans do not generally include coverage for floods. Choosing to purchase flood insurance is essential in order to protect the money you have invested in your home, replace your personal possessions and avoid paying additional costs in the event of a flood.

A flood map will show your property’s flood risk. Everyone has criticized FEMA (Federal Emergency Management Agency) for not acting quickly enough to help people in need, without realizing that they don’t operate on demand. FEMA can give you a map service to aid you to figure out if your property is situated in a flood area which is high or low risk. The premium for insurance will change based on the amount of risk involved.

How Does National Flood Insurance Work? The NFIP is a federal program which allows for property owners to buy insurance protection from the government to protect from damages and losses from flooding. The government makes financial protection available for communities that are members of NHIP and implement floodplain management ordinances to reduce the flood risks in their areas. In order to find details on specific types of insurance for homeowners, renters, condo owners or renters, or commercial property owners or renters, and check details of coverage, policy rates, etc., check the National Flood Insurance Program website. There is additional information about floor insurance and risks available at the website.

Search for an agent that deals in flood insurance. To help you in the search, the NFIP site has a service that will help you find an agent close by. Private insurance companies on the net also offer federal flood insurance policies. These are in agreement with the Federal Insurance Administration. The best thing to do is to speak to different agents, make sure you have an understanding of their policies and then look at the costs.

Choose complete insurance policies. Although flood insurance can be expensive it will be extremely useful if a flood does occur in your home. One thing to consider is that the property could still need flood insurance even if it is not in an official flood plain. Don’t hesitate until you have a flood. Paying for insurance today beats not having insurance when disaster strikes.

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