If the person owns the property free and clear they have the choice of not buying insurance at all, but if there is a mortgage the mortgage maker requires property damage must be bought. This is their protection against loss in the unlikely event of fire or hurricane.

Because of recent losses due to hurricanes in Florida rates have doubled in certain areas. Florida politicians have tried to require insurance companies to reduce their rates, but legislation will not stop high winds.

Almost no one wants to defend the insurance companies. Of course, they can stop selling in any state, but policyholders will shout even louder. Today in Florida the State itself insures more individual homes than they can ever pay if a Force 5 hurricane blows across it. The only way the State could pay is with a bond issue taxing everyone. Not a pleasant thought.

Why do the insurance companies charge so much? They have professional actuaries who use tables of loss expectations, home valuations and time to compute anticipated loss. The companies overhead must be factored in and a reasonable profit for stockholders dividends. Stockholders are entitled to a return on their investment each year. If this is not computed accurately the company could go out of business and there would be no insurance at all for anyone.

Each year the cry goes up, “Look how many millions they made. It’s not fair to charge us so much”. The correct place to look is a percent of total sales, not the total dollars. How many people have screamed about the millions any of the food chains make? Maybe because the bill seems so large because it comes in once a year.

Look at the size of the premium for car insurance as compared to home insurance and it will be apparent that home premiums are not that bad.

Will lowering home insurance rates increase home sales in Florida or anywhere? That is doubtful, but it may help older folks who live on a fixed income. If rates are not lowered it could force some to sell their homes. In the current real estate market it is much cheaper to rent than to buy and renters insurance is about 25% or less of owners insurance so there would be savings in both categories.

Home insurance is a requirement in most cases. The State regulators can check the computation of corporate actuaries. If it is judged fair there isn’t much the home owner can do.

Home owners should talk to their banker and insurance agent before anything drastic is done.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

Copyright 2007 Albert W. Thomas All rights reserved. Author of "IF IT DOESN'T GO UP, DON'T BUY IT!"