Imagine discovering your homeowners insurance is canceled while you are in the middle of selling your house to relocate. Or, imagine a situation where your job requires frequent travel and your insurance company pulls the plug on your insurance because it says your home is "unoccupied."

Insurance Superintendent Eric Dinallo today acted to protect consumers who find themselves in situations like these. He advised insurance companies that canceling a homeowners policy only on the basis that a dwelling is unoccupied is an illegal mid-term cancellation.

Diallo urged consumers encountering this issue to contact the Insurance Department. He said insurance companies must reinstate the policies of affected consumers. The action could potentially affect financially-pressed consumers involved in forfeitures.

"Consumers should know that the Insurance Department will act vigorously to protect homeowners. This includes homeowners who may be involved in forfeiture proceedings, which have increased because of the troubled economy. Insurance companies need to understand that the Insurance Law protects all homeowners from improper non-occupancy cancellations," Dinallo said.

"The fact that an insured individual is not occupying a home is not a legitimate reason, in and of itself, for canceling a homeowners policy. It is improper to cancel a homeowners policy simply because a property owner may be away from home because of a situation like an illness," he said.

After receiving numerous consumer complaints from across the state, the Insurance Department issued an advisory, known as a "circular letter," to the insurance industry. The advisory instructs insurers to stop the improper cancellations. Circular Letter # 23 (2008) is available on the Department's website, http://www.ins.state.ny.us/circltr/2008/cl08_23.pdf .

The situation of a Suffolk County woman is typical of the complaints. The woman's insurance company told her that her policy was being canceled because her home was unoccupied. But she explained that she was in the middle of trying to sell her home and relocate to the Albany area to take a new job. She said that either she or her parents were at the home every weekend and that a neighbor also looked after the property. The home was furnished and the utilities were still connected.

Other consumers registering complaints included a Syracuse couple confined to a nursing home, a flight attendant whose job required frequent travel, and a Plattsburgh man who was forced out of his home after it was extensively damaged when a neighbor's tree fell onto it.

In each of these cases, insurers wrongly advised consumers that their policies were being canceled because their homes were unoccupied, therefore increasing the risk to their homes.

The Insurance Department's advisory to insurers could help consumers who become temporarily displaced as the result of pending foreclosure proceedings.

Insurers may consider non-occupancy if it is among other factors that increase the risk to a property. It may not be considered as the sole factor in a mid-term cancellation.

Under the law, a homeowners policy must remain in effect, or be renewed, for three years from the date the policy first becomes effective. Cancellations or non-renewals during the three years are only permitted for certain specific reasons. These include non-payment of premium, as well as fraud or misrepresentations in obtaining policies or filing claims. Cancellations or non-renewals are also permitted when policyholders recklessly increase hazards to property or make physical changes that result in a property becoming uninsurable.

Insurers that have improperly canceled or non-renewed policies must offer to reinstate them, effective from the dates of termination. These offers must maintain the premium rates in effect at the time of the cancellations or non-renewals.

Consumers who believe their homeowners policies have been improperly canceled based on non-occupancy are urged to contact the Insurance Department. They may do so by calling toll-free 1-800-342-3736, between 9 a.m. and 5 p.m., Monday through Friday. Complaints may also be filed online at anytime by accessing the Department's website, www.ins.state.ny.us.

Under the present law in New York State, an insurance company may cancel your homeowners or tenants policy by issuing a cancellation notice during the first 60 days it is in effect as long as the cancellation notice states the specific reason or reasons for the cancellation.

After your policy has been in effect for 60 days it may not be cancelled or nonrenewed for a three year period, except for the following reasons:

1. nonpayment of premium (however, if payment is received by the company within 15 days of the mailing of the cancellation notice the policy will not be cancelled)
2. conviction of a crime arising out of acts increasing the hazard insured against;
3. discovery of fraud or material misrepresentation in obtaining the policy or in the presentation of a claim under the policy;
4. discovery of willful or reckless acts of omissions increasing the hazard insured against;
5. physical changes in the property insured occurring after issuance or last annual anniversary date of the policy which result in the property becoming uninsurable in accordance with the insurance company's objective, uniformly applied underwriting standards in effect at the time the policy was issued or last voluntarily renewed; or
6. a determination by the Superintendent of Insurance that the continuation of the policy would violate or would place the insurer in violation of the Insurance Law.

At the end of this three year period, your company may refuse to renew your policy, however, by law, they are required to provide at least 45 days, but not more than 60 days notice of nonrenewal.

The premiums charged for homeowners and tenants insurance vary widely from company to company, so it pays to take the time and effort to shop around in order to get the best value for your insurance dollar.

The cost of homeowners and tenants insurance depends on a number of factors including location; age and type of building; the use of the building, i.e., residence and/or commercial enterprise; local fire protection; choice of deductibles; application of discounts; and the scope and amount of insurance coverage you purchase.

A brick building, for example, is more resistant to fire than a frame building and, consequently, costs less to insure against fire. The building's location also has a bearing on the cost of fire coverage, because some communities have better fire protection than others. Also, some areas have greater crime and vandalism problems than others, which also affects the cost of insuring against such losses.

Territories

Each of New York City's five boroughs constitutes a separate rating territory for homeowners insurance. In the remainder of the State, rating territories are based upon the quality of the community's public fire protection, ranging from Class 1 (the best protection) to Class 10 (unprotected).

Deductibles

If your policy contains a standard all peril deductible, such as $250, you would collect the amount of any covered property loss, less $250. With a deductible, the premium cost of your policy is lower than if there were no deductible. In choosing the deductible amount, you bear the burden of loss up to the amount you feel you can afford. Deductibles save money because the first dollars of the insurance are the most expensive to buy. Contact your insurance company to see if they offer higher deductibles, such as $500 and $1,000, on your homeowners insurance coverage.

Hurricane deductibles discussed above are a relatively new feature in homeowners' policies. Insurers began offering or requiring hurricane deductibles following a series of catastrophes in the late 1980's and early 1990's, that caused major losses. The hurricane deductible is in addition to the standard all perils deductible contained in the homeowners policy.

Examine your policy carefully because many insurers require a hurricane deductible on homeowners policies depending on the location of the insured property. Most insurers who use these deductibles require them on insured properties located in Nassau and Suffolk counties and the five counties that make up New York City. In addition, several insurers require the deductible for the coastal areas of Westchester county.

A hurricane deductible is usually expressed as a percentage of the insured value of your house. The Department requires insurers to also express it as a dollar amount on the declarations page of any policy to which it is attached. For instance, if your home is insured for $150,000 and a mandatory 5% hurricane deductible is applied to your policy, you would be responsible for the first $7,500 of any loss as the result of a hurricane. If a hurricane causes $10,000 worth of property damage to your home you are responsible for the first $7,500 and the insurer is responsible for the remaining $2,500.

Credit Information

Over the past several years, insurers have also used consumer credit information, along with other information to decide whether to issue a homeowners or dwelling policy and how to price it. Under New York law, insurers that use credit information must adhere to the following consumer safeguards:

• If an insurer uses credit information in rating or underwriting a policy, they must send you a notice disclosing this fact, including the name of the credit reporting agency.
• If your premium is higher than it would be if you had a "better" credit score, you will receive a notice advising you of this fact. The notice will include an explanation of credit-related factors that affected your score.
• If there is an error in your credit report, you should contact the credit reporting agency to correct the report, and then inform your insurer or agent of the correction, as it may affect your premium and entitle you to a refund.
• Your insurer must review your current credit information at least once every 3 years, upon your request, unless it reviews updated credit information more frequently (e.g. annually) as part of their renewal process. When the company reviews the updated credit information, if your credit information has improved, you may be entitled to a lower premium, and the company must make any necessary adjustments at such time.
• Your company may not terminate your policy or increase your renewal premium based on credit information.

"Multi-Tiering"

Some insurers use "multi-tier" rating programs, in which more than one rate level can be established within the same company. Based upon their underwriting guidelines, insurers place insureds in rating "tiers" with others who have similar characteristics. Upon renewal, the experience and characteristics are re-evaluated to determine if the insured qualifies to move to a different tier.

Discounts

You should also check with your insurance company to see if they offer premium discounts for the use of dead bolt locks, smoke alarms, fire extinguishers, sprinkler systems and security systems. Insurers are required to offer premium discounts if a policyholder has installed hurricane/storm shutters and/or hurricane resistant laminated glass windows and doors. All of these devices minimize losses and in some instances, may deter them.

Some companies offer what is called a multi-policy discount. If you purchase your homeowners and automobile liability policies from the same insurer, you may receive a small discount. In addition, you can probably purchase a personal umbrella policy with liability limits of $1,000,000 or higher over your homeowners and automobile liability policies which might also be subject to a multi-policy discount.

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Before making purchasing an insurance policy, you should be aware of the types of products and coverages available in New York State. This Consumer Guide to Homeowners Insurance and other such publications can help enhance your understanding of the market.

You also need to know the types and limits of coverage you want to purchase. Do you want or need any additional coverages?

Check to make sure the insurer you are dealing with is licensed to sell homeowners insurance in New York State. If you are unsure of the licensing status of an insurer on the Web, check the Directory of Regulated Companies on the Insurance Department's Web site. In addition, you should only be dealing with licensed agents and brokers. If you are unsure whether an agent is licensed in New York, call or e-mail the agent and request his or her New York license number.

In seeking your rate quote, you will be presented with a series of questions. Make sure you answer these questions fully and accurately.

Shop service as well as price. Savvy insurance consumers know that sometimes the lowest price insurer isn't the best buy if an insurer is not responsive once claims arise.

Comparison Shopping

Comparison shopping makes sense and saves dollars. However, you should remember that price is only one of many factors to consider when selecting an insurance company. You should look at other factors such as insurance company claim practices, reliability, the services provided by agents, brokers or insurance companies, and the particular coverages the company offers to meet your individual needs.

There are over 200 insurance companies that write homeowners and tenants policies in New York. Many of these companies may charge premiums that compare favorably with those of the top 41 writers whose sample homeowners premiums are shown in Appendix A. Appendix B of this guide includes the telephone numbers of these companies that you may use to obtain information on the availability of insurance and on the filing of claims.

The price comparison tables shown in Appendix A show the homeowners and tenants insurance premiums charged by 41 of the top writers (by premium volume) in New York State. This information shows rates that were in effect as of April 1, 2007 for certain exposures for various rating territories in New York State. Your actual premium quote may differ significantly from the sample premiums based on a number of factors including location; age and type of building; the use of the building, local fire protection; choice of deductibles; application of discounts; and the scope and amount of insurance coverage you purchase. Only an insurance company or its authorized agent can tell you the exact cost for your policy.

The representative premiums shown in Appendix A are based on the following:

• The rates used are in effect as of April 1, 2007
• The premiums include off premises theft coverage
• The territories are ISO territories
• For New York City territories (ISO territories #3, 4, 5, 6, and 7), Protection Classification 1is used.
• For all other territories, Protection Class 8 is used.
• No discounts or surcharges are included.

The HO-2 and HO-3 homeowners policies reflect the premium for either a brick or frame dwelling insured for $200,000 with a $500 deductible, off-premises theft coverage, personal liability coverage in the amount of $200,000 and medical payments coverage of $1,000.

The HO-4 or tenants or cooperative apartment owners policy reflects the premium for either a brick or a frame dwelling with personal property coverage of $50,000, personal liability coverage in the amount of $200,000 and medical payments coverage of $1,000.

The HO-6 or condominium owners policy reflects the premium for an apartment in either a brick or frame dwelling insured for the amount of $15,000, personal property coverage of $50,000, personal liability coverage in the amount of $200,000 and medical payments of $1,000. The HO-4 and HO-6 tables also reflect premium charges that take into account the number of units in the building, one to four or more than four.

You should also read your policy carefully since the extent of coverage may differ somewhat from company to company. You should be aware of any co-insurance, the amount of deductibles and the types of exclusions contained in your policy. While you are shopping for insurance you may also find that some companies may include additional coverage without an additional premium, while others charge for every type of coverage added to the policy.

Buying Homeowners Insurance on the Internet

Although the Internet currently accounts for a relatively small percentage of total insurance sales, its influence in the marketplace is growing rapidly. Quoting agents are actively marketing their services to consumers via a growing number of Web sites. Quoting agents provide sample homeowners insurance rates to Internet users who respond to various online questions. In addition, many insurance companies and traditional agents and brokers have their own Web sites providing pricing, service information and, sometimes, the means to complete a homeowners insurance purchase. Appendix B has Web sites of insurers listed in the guide. The Insurance Department's Web site has a general listing of the Web sites of regulated insurance companies.

Remember, when you are applying for or purchasing insurance you are transmitting key financial and personal data to an insurer or agent. Make sure the Web site you are using is secure. Many Web sites will include their privacy and security policy on the site itself. For example, a Web site may be encrypting (coding) your private information to make it unreadable to third parties. The Web site will describe that process. In addition, you can activate your Web browser to notify you when you are entering or leaving a secure mode.

Over the next few years, Internet sales are expected to grow as competition intensifies in the electronic marketplace. New York State consumers should be aware that the Web can be a convenient means of comparing prices and/or purchasing homeowners insurance, but that it is not necessarily the best means for every consumer. Whether you use the Web or not, it pays to shop for homeowners insurance.