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

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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


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 increase in Maine, from $462 in 2003 to $676 in 2010, is partly the result of coastal storms that caused billions of dollars in property damage elsewhere, insurance experts said.

According to HomeInsurance.com, the average cost of a 12-month insurance premium sold by its affiliate providers in February 2013, the most recent month available for Maine, was $775. That's 68 percent more than the average premium for Maine in 2003. The average includes only policies sold via HomeInsurance.com's website.

Three primary factors contribute to the cost of homeowners' insurance, said Cale Pickford of Camden-based Allen Insurance and Financial.

First is the amount of claims paid out by a given insurance provider, he said. "To put it simply, the higher the claims experienced, the higher the rates are," Pickford said.

The second factor is returns on invested insurance premiums, he said. Each insurer invests a portion of its revenue to offset losses paid out in claims. If those investments don't pay off as expected, Pickford said, insurance rates can go up.

The third major factor is the price of insurance for insurers, known as reinsurance, he said. Insurance companies buy reinsurance to protect themselves from financial losses from catastrophic events such as hurricanes, wildfires or tornadoes.

The price of reinsurance can skyrocket after a catastrophe like Sandy, which caused an estimated $68 billion in damage in coastal areas from Maine to Florida.

Despite the rising rate, Maine is still one of the least expensive states to insure a home, according to the National Association of Insurance Commissioners.

In 2010, Maine's average annual insurance premium was the ninth-least expensive in the country, at $676, the association said.

The most expensive average premium, $1,534, was in Florida, and the least expensive, $422, was in Iowa.

Only a handful of insurance providers in the country will cover homes in Florida for wind damage, said Allen, with Turner and Barker Insurance.

According to the New York-based Insurance Information Institute, "wind and hail damage" accounted for the greatest amount of property damage nationwide in 2011, the most recent year for which figures are available, comprising about 46 percent of the value of all claims.

That category was followed by "water damage and freezing," which accounted for about 22 percent of the value of all claims that year. "Fire, lightning and debris-removal" was a close third, at about 20 percent.

Maine's premiums remain low because the state has suffered relatively few natural disasters, Allen said.

Maine hasn't suffered a catastrophic wind event since a nor'easter in April 2007 brought hurricane-force winds to parts of the state, destroying homes, power poles, roads and bridges.

"We do get hit," Allen said, "but certainly not to the extent that other communities do."

This story was updated at 4:20 p.m. on July 12, 2013 to remove a quote.

J. Craig Anderson can be contacted at 791-6390 or at:


Twitter: @jcraiganderson


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