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Homeowners to Face Major Rate Hikes in 2012

The Insurance Information Institute is predicting a 5 percent jump in homeowners insurance premiums in 2012, taking the national average to $1004. The rise will be a further economic blow to homeowners already coping with falling real estate prices and the high cost of maintaining a property.

The Institute is forecasting even larger increases for some states, with Georgia set to see a hike of 12 percent. In Texas, Farmers Insurance has raised rates 10 percent, while Allstate’s premiums are up 15 percent in Pennsylvania. Citizens Property Insurance in Florida is now charging 21 percent more on some residences, while North Carolina rates have climbed 6 percent.

Many Americans remain underwater on their mortgages, barely hanging on to their homes through the Great Recession, but unwilling to sell at a loss. Others are already behind on their mortgage payments, making the projected increases all the more serious. Since carrying homeowners insurance is a requirement of most mortgages, dropping their insurance policies is not an option for these hard-pressed homeowners.

In explaining the increased rates, insurers point to their own rising costs, including insured catastrophic losses in the U.S. in 2011 totaling $35.9 billion. On average, comparable losses for the period 2000 to 2010 averaged only $23.8 billion.

Additionally, companies are paying more in premiums to reinsurers, the entities that provide insurers coverage for catastrophic events on a large scale. Going into the spring storm season in the south and Midwest, the chances of even more of these types of costs to the industry are high.

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