July 12, 2013

Mainers paying a premium for homeowners' insurance

Maine homeowners pay more, and some struggle to get quotes, in the wake of destructive Atlantic storms.

By J. Craig Anderson canderson@pressherald.com
Staff Writer

The cost of homeowners' insurance has risen faster in Maine than in the rest of the nation over the past decade, and insurance experts say devastating storms on the Atlantic coast are largely to blame.

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Linda Varrell and her husband, Paul Cormier, say it was difficult and expensive to find insurance for their home being built on Littlejohn Island in Yarmouth. Coastal storms have led to soaring premiums and deductibles for houses on the water’s edge.

Gabe Souza/Staff Photographer

PREMIUMS ON THE RISE

The average annual homeowners’ insurance premium in Maine increased every year from 2003 to 2010. Experts say the high cost of damage from coastal storms was a contributing factor.

2003: $462
2004: $513
2005: $553
2006: $573
2007: $596
2008: $612
2009: $651
2010: $676

Source: National Association of Insurance Commissioners

The estimated 68 percent increase in the cost of annual premiums has not prevented Maine's housing market from making a moderate comeback in the past few months, but real estate agents say some prospective buyers in coastal areas are finding it hard to get insurance at all.

That's somewhat unfair, they say, because the Maine coast hasn't taken a direct hit from a severe storm since 2007. Last year, while coastal areas like New York and New Jersey suffered extensive property damage from Superstorm Sandy, Maine had relatively little damage.

The rising cost is especially problematic because so much of Maine's real estate value is concentrated in coastal areas. Fifty-eight percent of the value of all residential real estate in Maine is on the coast, according to Irvine, Calif.-based CoreLogic Inc. Only Florida and Connecticut have higher percentages of coastal property value.

When Linda Varrell of Yarmouth and her husband, Paul Cormier, decided to build a home on Littlejohn Island, they didn't expect it to be so difficult and expensive to get the project insured.

The couple had built a larger home about a half-mile from the coast in 2005 and obtained insurance for $1,200 a year, with no special deductible for wind damage, said Varrell, a public-relations executive.

The quotes they got for their current home construction project, in a protected cove on the water's edge, were two to four times as much, she said, with deductibles for wind damage as high as $50,000.

"These were the only companies that would even quote for a home within five miles of a body of water," Varrell said.

Varrell and Cormier were lucky to find five providers that were willing to insure their project, said Harriet Whittington, a real estate broker in Northeast Harbor, on Mount Desert Island.

Whittington's agency, The Knowles Co., has had several purchase deals fall through lately because the prospective buyers couldn't get homeowners' insurance from any provider, Whittington said.

"If you're on an offshore island, sometimes they will not insure you," she said.

Insurance analysts say the billions of dollars in damage caused by recent storms such as Sandy have made providers more squeamish about insuring properties and construction projects along Maine's coast.

Homeowners' insurance rates have shot up all along the Atlantic coast in the past 12 months, with the biggest increases in Florida, New York and New Jersey, according to reports from major insurance carriers aggregated by HomeInsurance.com LLC, an online insurance brokerage. Analysts attribute much of those increases to Sandy, which struck the East Coast in late October.

Although Sandy caused relatively little property damage in Maine, insurance experts said the massive financial losses incurred by insurers down the coast likely have had a spillover effect, in terms of higher premiums and increased difficulty insuring waterfront properties.

"That individual insurer is going to pay more, and then they're going to pass it on to the consumer," said Doug Allen, president of Portland-based Turner and Barker Insurance.

According to the Washington, D.C.-based National Association of Insurance Commissioners, the average 12-month homeowners' insurance premium in Maine increased by about 46 percent from 2003 to 2010, the most recent year for which data is available from all carriers. That's considerably more than the 36 percent increase nationwide during the same period.

(Continued on page 2)

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