The debate that has been stirring since Hurricane Katrina (and has developed even more since Hurricane Ike) is about coastal home insurance rates vs. inland home insurance rates. Many representatives from the House Insurance Committee are arguing that coastal homeowners haven’t been paying close to what they should be for homeowners insurance considering their exposure to major hurricane damage.

In a recent article by Dallas News, Texas state Rep. John Smithee (also a chairman of the House Insurance Committee) was quoted as saying, “People on the coast don’t want to pay higher insurance rates.  I don’t blame them for that.  But what they have been paying just isn’t realistic.  They have been living in a fantasy land.”

Smithee and others on his side of the debate argue that the risk of coastal hurricane damage is pushing up insurance rates in all corners of the state- even those who live hundreds of miles from the coast.

On the other end of the spectrum, representatives from coastal, low lying areas argue the opposite.  In the same Dallas News article Lee Otis Zap, President of the Galveston Windstorm Action Committee argues that while coastal residents will have to pay more for storm coverage- the increase should not be as substantial as some legislators are proposing.

“You can kill the economy of the Gulf Coast with this thing if it’s done wrong,” said Zap.

So where will insurance companies find the funds to cover the risk of coastal homeowners?  The next few months/years to come will surely tell.  HomeInsurance.com is based in the coastal city of Wilmington, NC, so I understand the risks and insurance coverage issues in coastal areas.  I also understand the need to provide low rates for all homeowners- especially those who live in lower risk areas. So I guess for this one- I’m on the fence.  What does everyone else think?