You may have read our recent post about State Farm non-renewing 10,000 home insurance policies in Florida. That’ll probably ensure they are making enough money, right?
The whole “Like a Good Neighbor” thing is losing its luster as they continue to raise rates and fight allegations of “gouging” their insured and illegally denying insurance claim payments in many states.
For the record, State Farm is the largest writer of personal-property insurance in the state.
Why the Increase?
We’re positive it’s not being done so they can continue to afford their $500,000,000+ yearly advertising budget…surely that money is spent out of necessity to “help” their current clients.
Perhaps not. State Farm Spokesman David Majors says the increases are necessary for “anticipated future needs.”
Translation? “We MAY need more of Alabama’s money in the future…we’re not certain, but taking more of your money is a risk “we” are willing to take.
Is State Farm Planning Any Other Changes?
We’re glad you asked. The answer is, yes! State Farm also plans to make some changes to the discount model in the state.
As you may have guessed, the change will also result in higher insurance premiums for Alabama customers.
We’ll spare you the mind-numbing explanation of how homeowners insurance rates are determined and give you “the truth.”
Previously, State Farm was offering discounts on policies if a particular homeowner fortified their home based on standards from the Insurance Institute for Business and Home Safety.
For example, if you “fortified” your home according to these standards, you would receive a 5% discount on your entire policy premium.
So if your premium was $700 for 12 months of coverage, the 5% discount would push your premium to $665.00 for the year. Basically, a 5% discount on the ENTIRE PREMIUM.
The new plan will only offer the discount for the portion of the premium that directly applies to the “hurricane damage” your home may suffer.
Translation? Your WHOLE policy discount of 5% is now reduced to the specific coverage for a hurricane. Say what?
Instead of your entire premium reduction in the example above ($35 dollars), you will only get a 5% discount on the $100 worth of “hurricane coverage” on your policy…or a $5 discount. Fire damage? No discount. Water damage? No discount.
So your $700.00 policy is $695.00 instead of $665.00. Advantage State Farm!
When Will the Changes Take Effect?
The increased premium will be effective for new business policies issued on November 15, 2011 and for any renewal on January 1, 2011.
Basically, if you’re already a customer, and your policy renews between November 15, 2011 and December 31, 2011, you won’t feel the bite until your 2012 renewal…or one year later.
If you bought your original policy after January 1, 2011, prepare to write a bigger check…
Or you can start shopping around and look for the same coverage at a lower price. Consider an independent insurance agent who can shop your rate with multiple carriers all at once to save time.