Even though our area has so far been spared a major hurricane hit this year, the threat is always there, as is the threat of losing your insurance. What happens if you can’t get homeowners insurance is one of those “I don’t even want to think about it” questions, but, if it happens to you, you’re in good company.
Florida and Louisiana are the two states in the country that have the most challenging homeowners insurance markets. Florida has the highest average home insurance premium in the country. They also both have state-run insurance of last resort companies that are called Citizens, and they are both trying to reform their state’s insurance obligations.
In addition, Florida is attempting to bring insurers into the state to help create more competition, driving costs down. The state’s Legislature has worked to reduce the number of lawsuits by limiting what attorneys can charge. High attorney fees were mostly blamed for driving up costs and driving out insurance companies, leaving homeowners no choice except to go to Citizens. It’s too early to know for sure what the Legislature is accomplishing, however, there is some evidence that progress is being made.
Nevertheless, the stress for homeowners is enormous, prompting some residents to consider leaving waterfront properties and properties prone to flooding. If you do find yourself in the unimaginable position of not being able to get homeowners insurance on your home or condo while carrying a mortgage, you could be in for some serious problems. Not having the ability to find insurance on your property violates your mortgage agreement. Your lender may force you into a more expensive policy, which is called lender-placed or force-placed insurance. Worse, your loan can be declared in default, risking a foreclosure if you’re not able to satisfy the mortgage.
I know this sounds dramatic and it is, however, one way is to have an advocate on your side like an insurance broker who has access to any new insurance companies coming into the state as well as an understanding of the system and may be able to offer advice. Also, Fair Access to Insurance Requirements (FAIR) plans were created in the 1960s to make insurance available in areas that had abnormally high exposure to risk. The Florida contact numbers are 850-513-3700 and 904-296-6105.
Citizens Insurance in Florida asked the state Office of Insurance Regulation to raise its rates for property insurance by an average of 13.1%. This request was denied and replaced with a cap of not more than a 12% increase. Citizens’ higher-ups feel the approved rate increase is artificially low, resulting in potential exposure beyond its assets. This affects the private market by not being able to compete with what was designed to be the company of last resort for insurance.
As a comparison, Louisiana’s Citizens’ Property Insurance is uncapped. This means their rates are based on what’s happening in the marketplace, allowing private insurers to compete and taking some of the financial exposure of the state. In addition, Louisiana has an incentive program that provides grants to encourage insurers to write property policies in areas of the state that are most at risk.
The solution to Florida’s unraveling insurance market is obviously to attract more private companies into the state, a feat that is easier said than done. We can only hope a plan is in place before the next “big one” comes knocking on our coastline.
