The Changing Face of Homeowners Insurance

Two states to watch in 2007 will certainly be Mississippi and Florida. The real estate markets in these two states have traditionally withstood natural disasters such as hurricaines. But insurers are fleeing the disaster-prone areas, leaving homeowners, and states, with no safety net.

State Farm made a huge round of news stories when it announced that it would not write any new policies in Mississippi. At the heart of the issue is whether hurricane damage was caused by wind or water damage, as homeowners' policies do not cover against water damage.

Insurers in Florida are in the process of scaling back their wind policies. Now Florida's legislators are trying to keep both insurers and property owners in the state. "At the root of the trouble is that insuring against a major storm in much of South Florida has been deemed simply too risky to be affordable."

Mississippi's response has been to threaten to mandate insurance companies into writing policies in that state, which has drawn widespread criticism from homeowners in other states. Florida's plan, meanwhile, has been to promise billions of dollars of bailout monies for both parties.

Certainly, every state has its own unique propensity for natural disaster. From tornado damage in the Midwest to California's ubiquitous earthquakes, the nation is poised to watch the developments in Florida and Mississippi very closely.