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New Jersey Is The New Florida

Superstorm Sandy in October 2012 caused more than $18 billion in insured damages (plus billions more in uninsured damage) but also caused a shift in how insurance underwriters view the Northeast.

According to insurance broker NAPCO's Spring 2013 State of the Market Report, underwriters and catastrophe modelers now regard the Northeast more like the Southeast when it comes to property insurance pricing, storm language and the availability of flood insurance.

Insurance underwriters have long taken a dim view of the Southeast, with its pounding hurricanes and expensive claims. Now the Northeast isn't looking much better.

What to expect

Experts speculate the Northeast residents will run into more windstorm deductibles and percentage-based deductibles when buying home insurance. Residents of "first-tier" counties -- those counties adjacent to the Atlantic - will see 1 percent or 2 percent deductibles in their policies, if they haven't already.

Also common will be rate increases on older structures that are not as well made or as strong as newer construction.

Expect language like "super storm" and "storm surge" to be added to policies, which will trigger special storm deductibles - and expect those deductibles to be higher -- says David Pagoumian, CEO of NAPCO.

Steven Weisbart, chief economist at the Insurance Information Institute, notes that there are multiple factors pushing up home insurance rates. He explains that "it's not so much the chances for loss - no one can predict that - but will rebuilding costs be higher?" The question is not so much will there be damage, he says, but what's the cost to fix the damage?

In addition, home insurance companies often turn to reinsurance for help after natural disasters, but reinsurance rates have been going up, says Weisbart. Also working against insurers are low interest rates. Insurers haven't been able to make much investment income from premiums before they have to pay out the money in claims.

Insurance nightmares

"Every year senior [executives] sit around a table and conjure up the things that keep underwriters up at night," says Pagoumian, Things like a New York terror event, a Japanese earthquake, the "Big One" in California, or a storm hitting Pinellas County, Fla., that leaves the whole city of Tampa underwater.

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