How they're figured

The Minnesota Department of Commerce put together a tip sheet explaining how homeowners' insurance rates are figured.

The report states "homeowners' insurance rates have two parts: a basic cost that covers normal events and a catastrophic charge. The price for both of these parts is increasing.

"The cost for "normal" losses is determined by the average loss paid for the past three to five years. The cost for 'catastrophes' is determined by looking at the catastrophic losses over the past 15 to 20 years.

"In the mid-1990's the average loss per policy in Minnesota for all homeowners and renters policies was $210. In 1998, the average loss rose to $900 per policy - the highest in the United States.

"In 1999 and 2000 the averages dropped to $420 and $470. Because the 1998 losses were classified as catastrophic, recovering the loss can be spread over several years. However, since most of the losses in 1999 and 2000 were considered 'normal,' companies are allowed, under the law, to recover costs more quickly."

Source: Minnesota Department of Commerce Tip Sheet on the rising cost of home insurance.