State Insurance Commissioner Jim Long has signed a settlement agreement with homeowners' insurance companies allowing an overall statewide average increase of 4.05 percent in rates beginning May 1.

This is a much lower statewide increase than the 19.5 percent increase originally proposed by the N.C. Rate Bureau. The bureau represents all of the homeowners' insurance companies doing business in the state.

"There has been a lot of speculation surrounding this homeowners rate filing, but I feel that we've reached a settlement that is fair to both consumers and insurance companies in North Carolina," Long said. "No one likes to see their insurance rates go up, but the industry made a strong case for allowing some increases this year. The silver lining is that most consumers won't see nearly the increases that were initially proposed."

The settlement also realigns several insurance territories along the coast.

"It makes sense to the Department that homeowners who live farther inland should pay less for insurance because they have less exposure to the impact of a hurricane," Long said. "The realignment of the territories kept this in mind and was a way to group the geographically similar parts of the coastal counties, creating fairer rates for homeowners at the coast."

There are many contributing factors that affect the rate-making process; the main arguments presented in the rate filing include the increasing costs associated with paying claims -- like rising construction and repair costs.

The approved rates are the highest allowable rates that companies can charge; they can -- and often do -- offer discounts that can lower what homeowners pay.