Now that Hurricane Sandy has passed, homeowners across the country are holding their breath, awaiting the impact that the disaster may have on their homeowner insurance premiums.
Insurance experts are divided on whether homeowners will see changes in their policies. Richard Bunch, president/CEO of the Woodlands Financial Group, a Woodlands, Texas-based insurance agency, expects rates to rise across the nation for several “superstorm”-related reasons.
“Sandy will create new catastrophe modeling that impacts the entire country. With the storm surge, wind and flooding spread across nearly 1,000 miles, the new models will increase exposure further inland,” says Bunch, who predicted that premiums will increase from 10 to 200 percent over several policy renewal cycles.
Bunch predicts that reinsurance companies, which back insurance companies, would increase their rates to the carriers – fees that would be passed onto consumers.
Bill Mills, vice president of SIA Group, an insurance agency with offices in North Carolina, disagrees: “One storm typically does not affect rates as a whole. But policy holders with a specific carrier that is heavy in that geographic area might be hit with changes to their policies and possible rate or deductible increases,” he says.
If rates do increase, Jason B. Wolf, attorney/partner with Koch Parafinczuk and Wolf, a property insurance defense firm in Orlando, Fla., says it may not happen immediately.
“Typically, state regulators need to approve increased rates,” Wolf says. “Most policyholders in the affected areas will probably see their rates increase whenever it is time to renew their policy.”
Meanwhile, relief is available (on a case-by-case basis) to homeowners whose properties were damaged by Sandy and who have Freddie Mac or Fannie Mae-backed mortgage loans. One option is forbearance on mortgage payments up to one year for homeowners living in Freddie Mac-backed homes in zones classified as major disaster areas by President Obama.
Servicers dealing with qualified borrowers can choose to suspend foreclosure and eviction proceedings up to a year and also waive late fees or penalties and postpone the reporting of delinquencies to credit bureaus.
Additionally, Fannie Mae-backed borrowers can be granted forbearance for up to 90 days, after which time additional forbearance may be given based on the degree of hardship.