If you thought the cost to insure what's likely your most valuable asset was getting out of hand, hold onto your wallet.

Home owners who've suffered homeowners insurance premium hikes as high as 35 percent could face yet another increase -- this one for 20 percent more.

A new study says despite recent rate increases and underwriting actions to reduce the industry's exposure to growing numbers of moisture- and catastrophe-related claims, the industry has yet to raise premiums high enough to offset the industry's growing cost of capital.

Chicago-based Aon Corp. says the cost of capital for personal lines of insurance is 11 percent to 13 percent. Homeowners insurance receipts returns only 4.8 percent and you, as a home owner, will have to help make up the difference.

Aon offers risk management, retail, reinsurance and wholesale brokerage, claims management, specialty services, and human capital consulting services.

Bryon Ehrhart, president, of Aon's Reinsurance Services says homeowners insurance premiums recently have risen 10 to 15 percent on a national average. While home owners in some regions have not suffered any premium increase, others are paying 30 to 35 percent or more for insurance than a year ago.

To make the industry financially viable, some homeowner insurance companies will have to raise rates another average 10 to 20 percent nationwide. Not all policy holders will be affected, but for home owners who do pay still more, some will pay more than others. The 10 to 20 percent is only an average.

Ehrhart said recent premium increases have been necessary after 10 years of losses in the homeowners insurance sector has cost insurers billions.

"There's nothing malicious going on. The pain follows suffering by the insurance industry which has lost $28 billion dollars," Ehrhart said.

Critics like the new Americans for Insurance Reform (AIR) say the industry is at fault and charge that the insurance industry is an ENRON-like behemoth of financial mismanagement. Bad investments, risky underwriting and other financial habits are now costing the insured more than they should pay to live safe and healthy lives. In the last 30 years, the insurance industry thrice has claimed liability insurance "crises" that rendered insurance unaffordable or unavailable at any price for many businesses, professions, home owners and others, according to AIR.

Covering your assets

The higher cost of insurance makes it difficult to shop around. Insurers who can't afford additional risks -- often those in regions where they are the dominant insurer -- are not taking on new customers. That reduces the pool of available insurers.

"Within the context of what regulations say they can charge some insurers are saying 'We don't know if we can continue to make these promises and keep them at these prices,' " Ehrhart said.

Still other insurers are suffering financially and as a result have had their rating reduced by financial rating companies like A.M. Best, Standard & Poors and others.

"If shopping around means find the best terms and conditions and price that might not be enough. You also have to look carefully at who is selling insurance and if they will be able to pay claims should there be a catastrophe," said Ehrhart.

Ehrhart suggest shopping around long before your policy's expiration date to give yourself ample time to check the financial status of insurers along with rates, available coverage, terms and other variables.

"Don't turn down a renewal notice," until you've otherwise secured satisfactory coverage, he added.

Other home insurance shopping tips include:

Published: October 16, 2002

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.