Homeowner Insurance Companies

Homeowner insurance companies are all about managing the many kinds of risks that could endanger the value or security of a home if damaged or destroyed. A homeowner insurance company understands that the residential property is probably the largest investment that most people will ever own. Few house owners can afford immediate repairs, so they will pay a premium on the insuring policy to manage risks for them. The companies then invest the money in low-risk investments for profit until the house owner turns in a claim for coverage. Most people might find that an agent will offer a wide variety of insuring options in addition to a house policy. This is because of legislation in 1999 that allowed lending institutions to merge in order to offer a more complete range of services. Those who would like to know who controls an insuring business, should ask who "underwrites" the policies and guarantees its financial stability.

The type of policy that insures a house can be very comprehensive. Most often, a homeowner insurance company is going to protect the owners from unforeseen hardship like vehicle or airplane crashes, explosions, riots, fire, lightening strikes, volcanic eruptions, vandalism, theft, smoke, weather-related damage, and power surges - all of which could potentially happen to a house. Many policies will cover everything except "acts of God".

The first thing someone will want to check about the available policies is the leverage of the insurer. Everyday premiums are collected and claims are paid. However, if a homeowner insurance company writes too many policies, carries too much debt, or depends on too many others to share in the responsibility of risk, it may be that they won't be around in a catastrophe to cover what a house owner needs. The insurer also must have liquidity, or enough positive cash flow, to keep their business less "at risk" than any other businesses. If homeowner insurance companies have too many higher risk investments, the house owner may be the price for their financial instability---not good when someone is depending on a policy when times are hard.

It is important to know when looking for the right policy that an insurer operates exclusively on balancing premium income and investments. This is why they want a low number of claims per policy. A homeowner insurance company is working within the same investment parameters as the home owner: low risk bonds, equities, money market securities, and real estate. Therefore, the fluctuating economy determines how viable the insurer will be. AM Best is a company who will provide the data and research "ratings" on almost all insurers. If homeowner insurance companies have an AM rating of A++, the house owner can be assured that they are insured by the best. However, if an AM rate is on the downward slide toward an F, it is about to be liquidated and the owner needs to find a more stable insurer immediately. Because a house is a big investment for most people, insuring it properly should be done deliberately and with wisdom. If a house owner is unsure of what to do, he can "ask of God, that giveth to all men liberally" (James 1:5).


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