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Homeowners Drop Insurance After Katrina
Homeowner insurance typically covers wind damage from hurricanes, as well as damage to the home from fires, auto accidents and other misfortunes. It also protects a homeowner if someone gets injured on the property. Along the Gulf Coast, flood insurance is sold separately from homeowner insurance, and made available thorugh a federal program.
Robert Page, a Houma, La.-based insurance agent and president-elect of the National Association of Professional Insurance Agents, said the owners of three large apartment complexes in Houma recently dropped their wind and hail coverage after their premiums doubled. Page said only a few of his thousands of customers have gone completely bare after Katrina.
But "it's only the beginning," he said. "In my opinion, it's going to get worse before it gets better."
Harvey, whose modest ranch-style house has a neat lawn and a long driveway for his black Cadillac, rode out Katrina in his home during the summer of 2005 and only briefly evacuated the city in the storm's chaotic aftermath.
His roughly $1,800 annual premium did not increase significantly after Katrina, but he said he elected to drop his Farmers Insurance Co. policy because the company paid him about $4,000 even though he blames the wind for about $10,000 in damage to his roof.
"If that's all I can get, I don't have any need to get insurance," he said, figuring he is better off saving his money than paying premiums.
In Louisiana, insurance companies raised their homeowner rates an average of 13.2 percent in 2006, according to Amy Whittington, spokeswoman for the Louisiana Insurance Department. Some insurers went far higher.
Many small business owners are feeling the sharpest pinch. The insurer of last resort for many Mississippi homeowners and businesses is the state's "wind pool," and its commercial rates have jumped 268 percent since Katrina.
Tom Simmons, who owns three office buildings in Gulfport, Miss., said he paid $3,070 in premiums for the rental properties before Katrina. Maintaining that level of coverage this year would cost more than $25,000, he said.
Simmons is considering dropping his wind and hail policies but holding onto his fire and liability coverage. Even though none of his properties flooded during Katrina, the thought of heading into the next storm season without wind coverage is "scary as hell."
"The whole darn area is facing this sort of thing," he said. "The insurance companies obviously want out. Maybe they're just pricing us out of the market rather than just saying they're leaving the state."
Jeffrey O'Keefe, president of the Bradford-O'Keefe Funeral Homes on Mississippi's Gulf Coast, already has scaled back his coverage.
Before Katrina, he paid $61,224 in annual premiums to insure five funeral homes, two cemeteries and a crematorium. Renewing that $7 million in coverage would have cost about $781,000, so he reduced his coverage to $2 million. But he is still paying $122,113 in premiums, twice as much as before the storm.
"As a small business owner, it's really putting a hurt on us," he said. "It's a bad problem."