The Lowdown on Homeowners’ Insurance

Unlike automobile insurance, where you can get a quick price quote just by entering your name, address, and date of birth on a website, homeowners’ insurance requires a much more complex set of variables and risk calculations than, “Does this guy get a lot of speeding tickets?” There is the cost of the house, of course, but especially on the Vineyard, there are additional factors.

Just the fact that a house is on Martha’s Vineyard, and thus vulnerable to ocean- related weather systems, plays a role. Recent news has highlighted how computer-generated weather models have caused insurance rates to spike. Bill Brown of Martha’s Vineyard Insurance and Joe Gervais of Tashmoo Insurance both express doubt that the worst-case scenarios spit out by the computers – a direct hit by a powerful hurricane – are accurate. “They’re not predicting the future based on the past,” says Bill. Joe agrees, noting during Hurricane Bob in 1991, the strongest storm to hit the Vineyard in the last fifty years, “very few buildings were damaged....The vast majority of claims were under a thousand dollars.”

Massachusetts Attorney General Martha Coakley criticized the proprietary weather models in January testimony to the state’s commissioner of insurance, and called proposed rate hikes based on them “illegally excessive.” State Senator Dan Wolf, who represents the Cape and Islands, has also publicly criticized the rate hikes and the undisclosed models on which they are based.

Where your house is situated on the Island (say, in a flood plain) can also affect the price, as well as your choice of insurance carrier. “Some companies won’t insure houses in Gay Head [Aquinnah], because they don’t have fire hydrants,” Bill explains.

Occupancy is another issue. Fifty-six percent of the houses on Martha’s Vineyard are used only seasonally (according to the Martha’s Vineyard Commission), and some insurers either won’t cover a secondary residence, or will only do so in a package with a primary residence. Different companies also have widely varying policies about renting out a house that can affect both cost and coverage options, but generally the more a house is rented out, the costlier and less comprehensive policies become.

All these variables add up to a need to shop around, and independent insurance agents offer various products. Bill says, “Different insurance companies have their strengths and, not weaknesses, but ‘market appetites.’ Some companies specialize in high-end homes, say over a million dollars, while others work more in the four-hundred- to five-hundred-thousand-dollar range. There is no one company that does everything.”

Both Bill and Joe stress that talking with an agent who knows the market is essential, and that while certain strategies, such as raising deductibles, can lower a homeowner’s bill, every situation is different. And though factors may differ here from the mainland, according to Bill one difference stands out: “We pay more.”

Q: How has the insurance market changed recently for Vineyarders?

A: During the last five years, says Joe Gervais of Tashmoo Insurance, we’ve seen little real rate increase; the rates began to rise in the mid-nineties when many of the large national insurers abandoned the Island, leaving a vacuum in the marketplace. Other companies, not necessarily just smaller ones, have stepped in. Bill Brown of Martha’s Vineyard Insurance explains that companies insuring many properties in one geographic location, such as the Cape and Islands, need “reinsurance,” which allows them to absorb significant losses should the area get blasted by a major storm. He says the cost of reinsurance has resulted in higher premiums for consumers. Any insurance company, regardless of size, has to be in good financial shape to provide customers with reliable coverage, so both Bill and Joe keep tabs on financial ratings, such as those available from the A.M. Best Company.