Rich Howes: Hi, it’s Rich Howes here at the Howes Insurance Agency here in Oviedo and Orlando, Florida. We get a question a lot of times about why homeowner’s insurance goes up, in particular when there were a few years where we didn’t have a lot of hurricanes, and so people wonder why their rates continue to go up even though we’ve had no hurricanes. Well, the main answer is simple. It’s called re-insurance.
Well, what is re-insurance? Re-insurance is insurance for the insurance companies. When you buy a policy with an insurance company, they don’t take on the whole risk. They actually sell it to a re-insurance company, and so it’s insurance for the insurance company. So when the re-insurance companies have heavy losses, which are oftentimes not near you, they must raise their rates charging your insurance company, and so they must charge you a little bit more. Your rates go up whether … you may not have a hurricane here in Florida, but whenever there’s wildfires in California, a big ice storm in Dallas and a snowstorm in Minnesota, and there’s heavy losses, the re-insurance companies lose a lot and must charge the insurance companies additional premium. Of course, that affects you.
Of course, we’ve had a couple of hurricanes in the last couple of seasons, and we’re going to experience some increases, but just know that it’s shared risk, so any time you see a natural disaster, the chances are your insurance company is going to be charging more and they’re going to be getting charged more by their insurance company, the re-insurance company. Hope that helps. Thanks.