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Homeowners Insurance: More expensive than a mortgage?

MEMPHIS, Tenn. -- Debra Lovelace has lived in her Frayser home for 25 years. A native Memphian, it's where she and her late husband settled after he retired from the military.

"It was a wonderful neighborhood," Lovelace said.

Lovelace has seen the ups and downs, and paid for them too.

A string of break-ins left her without homeowners insurance last year.

"They just sent a letter in the mail saying you're canceled," she told WREG.

Lovelace said when she contacted other insurance companies for coverage, all she heard was "no", with the exception of two quotes.

"If I recollect correctly, one was $3,200 and the other $3,600."

That's the quote for a house that's roughly 1300 square feet and worth a little over $50,000.

More importantly for Lovelace, her home is already paid off.

"I think I was paying $900 at first a year and I just couldn't afford it."

Lovelace said she recalls telling the agent, "I said if I pay that much money a month, I could buy a new house. That's a whole new house note."

Steve Lockwood of the Frayser Community Development Corporation told WREG he's heard from several homeowners like Lovelace.

"I got calls as high as for somebody owning a house worth maybe low 40s quoted as much as $8,000 a year!"

Lockwood told WREG he's mainly spoken with seniors who no longer have a mortgage, but he said the pricey premiums also threaten the recent revitalization Frayser is finally seeing.

In fact, the Frayser CDC is in the midst of a home buying campaign using the slogan, 'Don’t rent for $700 a month when you can buy for $480.'

Lockwood added, "If you're paying $200 a month in insurance costs, which could well be more than your mortgage costs, all of a sudden that opportunity to take advantage of affordable housing is out the window."

"It got to feeling sort of predatory to me."

Fred Davis has been in the insurance industry for 50 years. He's the first African-American policy writer in six states.

While Davis agreed that underwriting practices can hurt certain people, he said he doesn't think what's happening right now in Frayser is predatory.

"My companies are not predatory," said Davis. "I insure a lot of properties in that area."

Davis said homeowners insurance can be based on the actual cash value of the home or the replacement value, and some companies only allow the latter.

So, as an independent agent he has flexibility.

"We know that we ought not to be putting $80,000 on a property that has a cash value of $40,000, so we'll put them through a company that will accept actual cash value properties."

Plus, Davis, who said he still personally inspects and photographs every property his agency takes on, added that when it comes to issues like lower credit scores, they can vouch for the client.

"We can say we know this person, we know this property."

He said it's even more of a reason to shop around for an agent.

Lockwood has spoken to Davis about his concerns.

He said he's encouraging residents and potential home buyers to price check their insurance and do homework on agencies.

"I'd like to see the marketplace work. I'd like to see it get more competitive," said Lockwood.

Lovelace was able to get a lower price on her homeowners insurance, but she said it's still about $500 more than what she paid before.

"As of right now I think I'm sort of safe. I'd like to save some more money, but you have to do what you have to do."

More on Homeowners Insurance (from the Tennessee Department of Commerce and Insurance)

"We would encourage consumers to actively seek various quotes. Reach out to companies. Reach out to independent insurance agencies that represent multiple carriers," said a spokesperson for the TDCI.