Farm Bureau limits their payments for rooftop damage for recent policies.
Residents of Tennessee may soon need to make larger out of pocket payments for roof damage, following the latest insurance news in which it was announced that 100 percent coverage would no longer be offered by a large insurer.
Farm Bureau Insurance will now cover only the cash value of certain roof repairs.
The insurer, also known as Tennessee Farmers Mutual Insurance Co., has released this insurance news, which states that roofing materials such as shingles will no longer be replaced with coverage at 100 percent of their cost. Instead, the actual cash value minus depreciation will be paid out to the policyholders.
This insurance news will go into effect on policies that are purchased or renewed as of October 1, 2012.
The difference in coverage means that homeowners may find themselves paying for as much as 75 percent of the cost of the new roofing materials in the event that their homes experience damage. The insurance news does not apply to decking, trusses, and other structural components of a roof, nor to the labor costs associated with the repairs. Those costs will remain fully covered as was previously the case.
Officials from Farm Bureau have said that they needed to make these changes in order to help the insurer’s bottom line. Dan Batey, a spokesperson from the insurer, said that “We had to make this change because we can’t continue to be unprofitable and lose money.”
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Since 2008, Farm Bureau has been paying out more in claims that it has been collecting in premiums. This has caused Standard & Poor’s to reduce the insurer’s credit and financial strength ratings as of August. In order to help to fill the gaps, the company has been making insurance news by drawing down its own surplus fund.
Unfortunately, in 2011, this condition became even worse, when it made even larger insurance news by finding itself paying out $1.40 in claims payments for every $1 that it brought in through premiums. The outcome of this cost was a shortfall of $267 million. According to a filing that Farm Bureau made with regulators, this was caused primarily from having to replace roofs that were already quite old and past the point that they should have been replaced in the first place, after they were damaged by severe weather.
According to sources, this is not a new trend amoung Tennessee homeowners insurance policies. Both Allstate and Homesite (an affilate of Progressive and GEICO) have limitations on roof coverage as well. The industry has been struggling within the region between the high amount of claims and ke