While you may say I don’t live in Florida, making sure your home insurance company is solvent may be more important than ever.

A little history on Florida: Beginning on Sept. 9, 1989, through Sept. 25, 1989, a powerful Cape Verde tropical cyclone inflicted widespread damage across the northeastern Caribbean and the Southeastern United States. This cyclone was known as Hurricane Hugo. Across its track, Hugo affected approximately 2 million people. Its direct effects killed 67 people and inflicted $11 billion in damage.

Three years later, Hurricane Andrew hit Homestead, Fla., doing $27.3 billion in damage.

Insurance companies faced with these losses had to make some drastic decisions.

Should they discontinue doing business in Florida, should they raise rates, could they reduce their exposure by canceling policies near the coast, would they stop writing new policies.

Now remember insurance companies do not operate in a vacuum. They are regulated by the state in which they are doing business. Now Florida realizes it has a problem: If homeowners and business cannot get insurance or cannot afford insurance, then no one is going to move there. Some companies left the state, others raised rates (as high as the state would allow), and some quit writing new policies or pulled back from the coast.

Realizing that Florida had a problem some ingenious individuals thought perhaps this would be a good time to open a new insurance company. Florida, desperate for companies to do business in the state, may not require the traditional reserves required to be an insurance company. Reserves are cash required to be readily available to pay claims. Not only did this happen, but at the time Florida bragged about the new insurance companies coming into the state.

Remember insurance is a promise to pay sometime in the future. If your business model is to file bankruptcy when its time to fulfill your promise, then we have a crisis.

Understand that your home will be one of your largest investments. Weather patterns are changing. Tornados, wild fires and hail storms can create billions of dollars in claims in a matter of minutes.

To insure your company has the ability to honor the promise it made to you, ask your agent for its ratings. There are companies who for a fee will attest to the financial solvency of an insurance company and place a rating on them. They will judge the companies claim-paying ability and compare them with similar insurance companies. I would avoid any company that has no rating. On your own you can research any company.

As of Aug. 19, the top five rating agencies are A.M. Best, Fitch, Moody’s, S&P and KBRA. When looking for a home or business insurance company, you would be looking under property/casualty insurance. A company with a high rating for its life insurance company may not have the same high rating for its home and business insurance and vice-versa.

Shopping for insurance is not a simple process. Insurance is not a commodity to be judge solely by price. A company’s financial solvency is important. Claim time is too late to find out about the quality of your home insurance company.

Bob Hollick is a State Farm Insurance agent based in Washington. His column appears every other Friday in the Observer-Reporter.