Storms hit homeowners insurance coverage

The sad sight of houses pulverized by a tornado in St. Charles should get us thinking about homeowners insurance. Insurance company executives are thinking hard, and some are pulling back coverage.

Higher deductibles and limits on coverage for roof damage are among the nasty changes. Premiums are up nationally by 4 to 6 percent nationally, according to the Insurance Information Institute, an industry trade group. That is two to three times consumer inflation.

Historically, youve been able to buy replacement cost coverage that would include the roof. Even if its 20 years old, if its hit, you get it replaced, said Larry Case, executive vice president of the Missouri Association of Insurance Agents. Lots of companies still offer that, but some are limiting claims on older roofs to their actual cash value. Thats a lesser level of coverage.

Under replacement value coverage, the insurer pays to repair the damage fully with new material. Under cash-value coverage, the insurer pays only up to the depreciated value of the roof.

If a roof has been up for half its expected life, the insurer may pay only half the repair costs. If it costs $8,000 to fix it, they may only give you $4,000, says Case.

Tom Wilson, CEO of Allstate Insurance, created a kerfuffle in the insurance business last year when he defended such a policy in a conference call with investors.

People just dont get their roofs fixed and then a hailstorm comes and we replace a $20,000 roof when were getting a thousand bucks from the customer and its obviously not a good trade, Wilson said.

Allstate is rolling out new policies that fully replace roofs that are less than about 10 years old. Then it goes to a schedule that pays less. A spokeswoman said the average roof it insures in Missouri is five years old, so most homeowners arent affected.

Insurers are also getting more reluctant to replace areas that arent damaged, even if they look strange after repairs. A 2001 hail storm in north St. Louis County damaged 70,000 homes and provided a classic example.

The hail often ripped up siding on one side of a house, but not the others. Many homes were old, and insurers couldnt find new siding that matched the color of the other sides.

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Storms hit homeowners insurance coverage