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Marketing Home sweet house payment New product pays insureds' mortgage in the event of disaster By Phil Zinkewicz One thing we learned from last year’s hurricane season is that when a catastrophe hits, the blows come from all directions. Hurricane Katrina and her siblings destroyed property, closed down businesses, left people homeless and resulted in deaths. Calling Katrina the most destructive catastrophic event ever, insurers felt and are still feeling the losses at the bottom line. But residents of the states hit are feeling more than just lost property. They are suffering an emotional upheaval. Their first response was: “Where do we go? What do we do?” Even though many of them were eventually placed in “temporary” homes in other parts of the country, some of those who are still residing in those temporary homes continue to wonder: “What do I do now? Do I go back to my home state even though my property has been destroyed? Where will I find work now that my business no longer exists?” Last year’s hurricane season has also drawn attention to existing property insurance models. Are they sufficient to endure another hurricane season such as the last one? Political gurus are trying to decide the roles of federal and state governments in catastrophe situations. One aspect that has received little attention is the question of insureds’ mortgage payments in catastrophe-hit areas. Where will insureds get the money to pay their outstanding mortgages if they are homeless and without employment? Joe Taborek, marketing manager for Credit Insurance Markets, is spending a good deal of his time these days talking to independent insurance agents to educate them about a product that addresses just that issue. Called “First Protector,” it is a disaster mortgage insurance product that pays an insured’s monthly mortgage payment (including taxes and insurance) should the insured’s home become unlivable for 48 hours or more due to a covered disaster causing damage to the insured’s home. Monthly mortgage payments are made for up to two full years while the insured’s home is being repaired or rebuilt to livable conditions. Should the home be judged by a governmental agency to be permanently unlivable, First Protector helps pay the insured’s outstanding mortgage loan balance up to the amount indicated by the mortgage servicing company. The policy also pays up to $500 of the insured’s homeowners policy deductible for a covered loss, even if the insured is still able to live in his or her home. “First Protector is an open-peril policy, so any disaster that causes damage to the structure of a home is covered, unless it is stated in the policy exclusions,” says Taborek. “Covered disasters include fire, hurricanes, flooding, earthquakes, tornadoes as well as common household disasters like gas leaks or even trees falling on the house. A typical homeowners policy pays for the repairs, but it does not usually make an insured’s mortgage payments.” Taborek points out that First Protector is not earthquake, flood or fire insurance. “It was designed to assist the homeowner by paying his or her monthly mortgage payments in the event of a disaster. You still have to carry homeowners insurance. Your mortgage company requires that. But homeowners insurance usually does not pay your monthly mortgage payments.” The insurer that underwrites First Protector is American Reliable Insurance Company, a carrier rated A- by A.M. Best. The MGA for the company is First Service Group of Pittsburgh, Pennsylvania. Taborek says that the coverage applies to a dwelling, townhouse or condominium unit owned by the insured and rented or held for rental to others. Also covered are seasonal/vacation or secondary homes if used by the insured on an intermittent basis. Mobile homes are not covered. “The premium is determined based on the insured’s total monthly mortgage payment, including taxes, insurance and other escrows,” says Taborek. “The insured can elect coverage up to but not more than the band in which his or her mortgage payment lies. Each band has a corresponding monthly premium rate.” Taborek provides the following premiums for First Protector coverage: “If an insured’s monthly mortgage payment is between $400 to $600, the monthly premium payment would be $6. If the monthly mortgage payment is between $601 and $800, the premium payment would be $9. On an annual basis, those premiums would be $68 and $103, respectively. At the high end of the scale, if the monthly payment range is between $2,001 and $3,000, the annual payment would be $353. Obviously, if mortgage payments change during a given year, the insured should contact American Reliable immediately.” Premiums are drafted monthly from an insured’s checking account, and commissions (15%) are paid within 45 days of premium collection. For independent agents, this is an ideal selling tool, says Taborek. “I didn’t believe at the start that this was a product that should be sold through direct mail. A face-to-face communication about the product is the best way to market it,” he says. Pam Mellott, of the Tampa, Florida-based Adcock-Adcock Insurance Agency, is excited about this disaster mortgage insurance product. “We read about it five or six months ago and we became extremely interested. When we first offered it to our insureds, they became very interested as well. We knew that only AAA agencies were selling it, so we decided to provide them with competition. American Reliable provides the agency with very well put together brochures with the agency’s name on it. When the insured sends in the payment to American Reliable, the agent gets the commission. It is an easy and profitable way for the agency to increase commissions. Moreover, it is product that is sorely needed, especially in disaster-prone areas of the country. Just look at what happened in Louisiana. When peoples’ homes and, more important, their businesses are destroyed, how do they make their mortgage payments? As a matter of fact, I bought one of these policies for myself.” Taborek says that what American Reliable is looking for is to establish relationships with independent agents such as Adcock. “We want to work with agents that have a substantial book of homeowners business,” he said. “The product we offer is a sound one and, with the seasonal changes becoming more dynamic, it is one which is advantageous to homeowners.” * For more information: |
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