By Jesse Herman, contributing editor
Dropping insurance coverage for your home or business seems to be an irresponsible gamble. When deciding between insurance and your next meal, though, it is the only move.
Home Insurance premiums are skyrocketing in Louisiana and Mississippi, resulting in some people dropping their coverage. According to most local insurance agents and consumer advocates things are expected to get worse before any noticeable improvements.
"I have every belief that it's going to be more and more common," said Amy Bach, executive director of the United Policyholders advocacy group. "If it's a choice between eating or paying their insurance bills, of course they're going to eat."
June 1st marks the beginning of the next hurricane season. If a hurricane strikes the area, it would compound the problem immensely. Anyone without insurance could lose everything in a storm or some kind of accident.
The majority of people dropping their insurance policies: elderly homeowners who have paid off their mortgages or have a fixed income. This is because mortgage companies require borrowers to have insurance, so only homes that are paid off can drop their insurance.
"You're basically playing Russian roulette with your most valuable asset," said Robert Hartwig, president and chief economist of the Insurance Information Institute.
Right now, there is no way to verify how many people have insurance. Insurance commissioners in Mississippi and Louisiana are not keeping track of how many policyholders are dropping their coverage, nor do they know which are buying policies from a different company.
Shopping around for homeowner insurance is counterproductive, as homeowners in Louisiana are no longer protected by a state law that bars insurers from canceling policies that have been in effect for three years or longer.
Homeowner insurance premiums are rising, flood insurance is sold separately and according to many left in the Hurricane Katrina aftermath- their policy only covered a fraction of the damages anyways.
According to the Louisiana Insurance Company, Louisiana homeowner rates rose to an average of 13.2% in 2006.
Small business owners are getting hit hard in Mississippi. The states “wind pool”, and commercial free rates have jumped 268% since Katrina.
Still, few policyholders are going bare completely. Instead they are compromising what coverage types are perceived to be least needed, such as wind and hail policies. This may minimize a gamble, but will not provide the security blanket needed to sleep well at night.
Even with certain coverage types scaled back, small business owners are still paying twice as much as than before Hurricane Katrina. Insurance is not even an option for most unless they scale back.
The economic climate now involves small business policy holders who have reduced coverage in half, pay double than their previous “full plan” and are scared about what the next Hurricane season may bring. This has resulted in an unstable environment that needs a firm local base to flourish.
If you are wondering about potential economic growth in areas of Mississippi and Louisiana, check out the weather channel. Often time weather forecasters are wrong, but at least they have some data to work with.