Eastern Tennessee – Home Insurance Rates on the Rise?

Natural weather phenomena as severe as hurricanes or as mild as seasonal storms can have an impact on homeowners in both the short and long term, as spring storms in eastern Tennessee are now demonstrating. In the short term, of course, homeowners can see their houses or mobile homes damaged by the excessive wind that comes with such storms. In the long term, however, the impact continues to be felt in the form of increased homeowners insurance rates to safeguard against such threats. That is an impact that may last for years or even decades to come.

Chris Clark, who has lived in the eastern Tennessee town of North Knoxville for almost 20 years reports that for most of that time, his homeowner insurance rate has remained fairly stable. Clark pays around $700 each year, but was shocked to find that when he went to renew his coverage two months ago, his rate had jumped all the way to $1100 – an increase of more than 55%. “My reaction was to contact my agent and find out if this had relationship with the weather – the storms that we had in June of this year” says Clark.

According to Clark, he was told that his rate increase was not due to the damage his own home sustained since home insurance premiums are not determined on an individual basis. Instead, the catastrophic losses associated with the spring storms of 2011 had caused the company to shift rates upward across the entire eastern region of Tennessee.

Tennessee State Law

In Tennessee, insurance companies must comply with regulations issued by the Tennessee Department of Insurance. Some of these regulations relate to rates. Companies are allowed to shift their insurance rates by as much as 15% without seeking departmental approval, but increases of any more than that require prior approval from the TDI. Such drastic rate alterations are considered a matter of public importance, with the TDI serving as a watchdog organization to protect consumers from predatory pricing.

The fact that Clark’s premium increased in excess of that 15% indicates that his insurance company had received approval for the higher rates, though in some states companies can raise rates in some places as long as their average statewide rate continues to meet existing regulations. In an interesting twist, Tennessee also requires insurers to seek approval if they are going to decrease rates by more than 15%. This demonstrates the need for insurers to collect enough revenue to stay solvent in case of a disaster – so that they will be able to remain in business and pay claims.

This explains why companies in Tennessee are raising homeowners insurance rates at this time. They had to pay out considerable monies as a result of the 2011 storm season. Insurance companies need to recoup that money so that they can build back up the reserves they will need should another strong storm season or some other natural disaster strike.

Homeowners living in Tennessee or any other state are advised to comparison shop for homeowner’s insurance quotes online on at least a yearly basis in order to see if changing companies can net them a lower premium for this essential protection on their biggest financial asset – their home.