Florida is facing a storm when it comes to homeowners insurance. Homeowners are grappling with a rapidly changing insurance landscape. Florida currently holds the dubious distinction of having the highest homeowners insurance premiums in the nation, and there’s a growing concern that these figures aren’t set to fall anytime soon. This blog covers the current landscape and provides tips for homeowners concerned they can’t afford their premiums or are worried their insurer will drop them.
The Current Landscape
By the end of 2022, Florida’s average annual property insurance premium had skyrocketed to over $4,200, triple the national average. What’s concerning for many Floridians is the growing consensus among insurance experts and analysts that a decrease in premiums might not be on the horizon. The hopes of a reprieve have been dampened despite reform efforts by Gov. Ron DeSantis and the Legislature.
Adding to these woes is the unsettling trend of insurance giants departing from the Florida market. Recently, Farmers Insurance announced its exit, discontinuing new coverage policies and impacting roughly 100,000 policies. This decision from Farmers wasn’t an isolated incident, as it became the fourth major insurer to vacate Florida in just a year.
The Factors at Play
Several reasons contribute to this scenario:
Climate change: Extreme weather, intensified by global warming, is increasingly threatening the insurance market. One report underscored that stronger hurricanes have led to increased losses from hail, wind, and tornadoes.
Legal landscape: Florida’s legal system has been cited as “having one of the most generous attorney-fee mechanisms in the country” by the Insurance Information Institute. The result? In certain cases, the attorney fees incurred by insurers surpass the awards provided to homeowners, creating a litigation-friendly environment that impacts premiums.
Dependence on reinsurance: Local insurers rely heavily on reinsurance to settle storm claims annually. This form of insurance for insurers has seen its costs escalate, with a 27% spike just this year, as reported by the state’s Office of Insurance Regulation.
Citizens Property Insurance, a state-run entity, was originally established as a last-resort option for homeowners struggling to find coverage elsewhere. It covers over 1.3 million Floridians, but there’s concern that its policyholders might be confronted with significant rate hikes in the years ahead, further complicating Florida’s insurance conundrum.
In the face of these challenges, some homeowners, especially those who have paid off their homes, have considered forgoing insurance altogether. However, it’s crucial to note that while eliminating premiums might seem tempting, the financial ramifications of potential damages could be catastrophic. A hurricane, flood, or any other natural disaster could result in losses that might prove overwhelming, leaving homeowners financially devastated.
Navigating the Insurance Waters
If you’re a homeowner concerned about your insurance company departing or struggling with ballooning premiums, here are some actionable steps:
Stay informed: Stay updated with the state’s insurance landscape. Know your rights and available options.
Shop around: Don’t limit yourself. Explore various providers and compare their offerings. Some might provide better coverage at a more affordable rate.
Increase your deductible: A higher deductible might lead to a lower premium. Assess your finances and see if this is a viable option.
Seek discounts: Some insurers might offer discounts for home improvements or for bundling multiple policies. It doesn’t hurt to ask.
While the current scenario might seem gloomy, being proactive and informed can help homeowners chart their course.
This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.