How Will Southern California Fires Affect California Homeowners Insurance?
Posted by David Schneider

The recent wildfires throughout Southern California have caused over $1 billion in estimated damages. As many struggle to pick up the pieces, the inevitable onslaught of homeowners insurance claims are pouring into the offices of California insurance providers. Those properly insured can find consolation in the fact that their insurance policy will cover most, if not all, of the cost to rebuild their homes.

With over $1 billion in potential losses facing California homeowners insurance providers, many are worried that homeowners will see a rate hike because of the fires. While this is a possibility, state officials and experts say increased premiums are unlikely.

Experts Believe Homeowners Insurance Fees Will Not Increase

California has long been the largest market for homeowners insurance. Despite occasional mass insurance payouts for past fires (such as in 2003) and earthquakes, insurance companies enjoy some of the highest profits in California. Thanks to past financial success, insurance companies have more than enough cash reserves on hand to pay the claims of these most recent fires. In fact, profits between 2004 and 2006 are about $6 billion dollars for homeowners insurance companies.

Another factor that works in favor of California homeowners is the fact that the insurance industry in California is one of the most scrutinized and highly regulated in the nation. State authorities may be reluctant to approve rate increases. This is especially true given recent efforts to decrease California insurance rates in the past year.

Skeptical California Homeowners Fear Higher Insurance Rates

Despite the reassurance by state officials, many homeowners are worried about increased rates. Given past experience with rate hikes, few can blame them. After the 1994 Northridge earthquake, many insurers threatened to pull out of the market. The state had to create a special authority to sell earthquake coverage in order to convince them to stay. Others point to increased rates and canceled coverage on the Gulf Coast after Hurricane Katrina in 2005. While profits have rebounded since then, many believe insurance providers will attempt to recoup current losses by raising rates.

Dropped Homeowners Insurance Coverage Also a Possibility

There have already been reports of major insurers threatening to cancel coverage if homeowners in high-risk areas fail to take precautionary measures. For now, a law passed after the 2003 fires protects the coverage of those whose homes suffered recent damage. This law prevents insurance companies from canceling coverage for at least one policy period. However, the law does not protect individuals whose homes were undamaged. This makes dropped coverage and more stringent coverage requirements a possibility for many.

Looking at the issue with the glass half full, the high profit margins enjoyed in California will likely make insurance companies reluctant to leave the market. Even so, Allstate Corp. announced earlier this year (prior to the fires taking place) that they would no longer underwrite new homeowners insurance policies in California, attributed to the risks imposed from natural disasters. Allstate is also attempting to gain approval for a 12 percent rate increase for current customers. Despite this, no other companies have yet to show indications of dropped coverage or increased rates. Whether or not this fact holds true remains to be seen.

Finding the Mortgage Agent that is Right for You
Posted by David Schneider

The mortgage and housing market is a tricky maze to navigate. When planning a move, there is so much information to learn about homes, mortgages, locations, potential problems with locations, property values, loans, credit scores and new neighbors.

With regard to finding a house, your best bet is to use a realtor. Mortgages, however, are a little bit more detailed and require the expertise of a good mortgage agent. Keeping certain things in mind and having a formulated understanding about your needs will help you come out unscathed, with the best mortgage for your particular situation.

Know Your Credit Situation and Find a Mortgage Agent That is Right for You

As in any situation regarding financing, your credit score plays a large part in whether or not you receive a line of credit and at what interest rate. If you do have some blemishes on your credit, are they easily fixable? If so, it’s worth your time to get them cleared up. Doing so will save you a substantial amount of money during the life of you mortgage loan. No matter how good a mortgage agent is, he or she can only do so much with the situation you bring to the table.

Know Your Mortgages

Mortgage agents are great at finding the best mortgage for your particular needs. However, your first visit with the mortgage agent is not the time to be educating yourself on the basic aspects of mortgages. In general, make sure you understand the difference between fixed rate and adjustable rate mortgages.

Questions to the Mortgage Agent

Be sure you are aware of the points a mortgage agent charges for his or her services. They are, after all, on your side and do not make money without your mortgage purchase. However, like any business, mortgage agents are salespeople. While the products they propose appear to meet your needs, ask what is in it for them.

Some smaller companies do not charge fees or points on a mortgage. Rather, they keep the mortgage and service it for the full term. They make money on the interest earned over the life of the loan. When smaller companies do this, they are able to move clients from one loan product to the next, as often as necessary. When this occurs, you as the mortgage holder do not have to pay any sort of fee.

Finally, determine where they are finding mortgage offers and information. Do they themselves us a broker? Are special financing arrangements set up through certain banks?

Knowing all of this information up front and then not being afraid to ask key questions during the interview process will help you arrive at the best decision for you needs. Remember, YOU are interviewing THEM.