Like a bad soap opera, the Florida insurance storyline keeps repeating itself. This time it’s not even flood insurance, which I touched on two weeks ago; it’s your regular homeowner’s insurance that is breaking hearts all over the Sunshine State.
Here’s an interesting little fact; Florida is the most expensive state in the United States for home insurance, according to the insurance trade group Insurance Information Institute, and premiums are going up. Florida residents are projected to pay on average $2,380 in premiums this year, a 21% increase over 2018. The average American homeowner is expected to pay $1,297 this year, up 4% from 2018.
Some of the reasons Florida’s premiums are going up have to do with claims resulting from two hurricanes, Irma in 2017 and Michael in 2018. As we Floridians know or should know, even if we don’t take a direct hit from a hurricane, no matter where it hits in the state, we’re all subject to increases in insurance. Adding to payouts for storms, there is an increasing amount of litigation over insurance claims and sham roof-related claims, as well as increasing rates for reinsurance insurers to mitigate some of their risk.
The end result of this is insurance carriers experiencing mounting losses and increasing premiums or dropping coverage completely in certain areas. Some homeowners are being forced to go to Citizens Property Insurance Corp., the state-backed insurer of last resort, which is quickly increasing the number of policies they carry. We’ve been down this road before with flood insurance; in the end, it’s the Florida taxpayer who gets hurt.
What we don’t know at this point is if it will have any effect on the real estate market. Florida residents and out-of-state buyers are reeling from sticker shock, but will that translate into a cooling of the blow-out real estate market we’re in? My opinion, for what it’s worth, is it won’t have any significant effect on the value of the real estate market. Individuals relocate to Florida and continue living here for reasons other than insurance premiums. In all respects, Florida is a low-tax state with so many other benefits driving up the population I doubt an insurance increase will change too many minds.
Florida lawmakers have been attempting to change some legislation to help control the growth of insurance premiums with bills that put limits on attorney fees and frivolous lawsuits and claims, hopefully reducing the incentive for homeowners to go forward with false claims.
And all of this is happening at the same time we can expect flood insurance increases in October. FEMA is reviewing its national insurance program. It is estimated that one out of five Florida homeowners (19.8%) should see a decrease in their yearly flood premium. However, one out of 25 (4.2%) should see a yearly rate increase greater than $240. We’ll know more at the beginning of October.
I personally had about a 15% increase when my homeowner’s policy renewed a couple of months ago, and what I hear from other people is about the same. Will it drive anyone out of Florida? I don’t see that happening. When the flood insurance increased several years ago there was a momentary panic, but it evened off when the federal government made some changes, and it had no effect on the real estate market.
There’s always something as the world goes round. Stay safe.
