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Tag: Anna Maria Island insurance

Title insurance and storms

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Hopefully, Debby with her rain, Helene with her surge and Milton with his wind are in our rearview mirrors by now, not forgotten, but we survived. Next, we can look forward to more mundane real estate issues like insurance.

What if you were ready to close on a new property and the possibility of a named storm was on the horizon? This situation could be the ultimate inconvenience since there is a very good chance you may not close your sale on time, costing money and delays with movers, utilities, and possibly short-term living arrangements. This is an important thing to keep in mind when you live in a hurricane zone like we do. Since both buyers and sellers are in a real estate transaction together, they both should be motivated to give allowances if this is happening.

This sometimes little-known insurance issue is called a moratorium, also known as a binding prohibition. They are issued by insurance companies for certain high-risk areas. During hurricane season, insurance companies wait until 24 to 48 hours before the impact to issue a moratorium on buying new policies. This could delay a closing since the insurance companies will not bind or cover the property in question until the storm has passed. If this happens to you, there is almost nothing you can do about it short of closing the property without property insurance – a non-starter if you are financing any part of the sale.

Since we’re talking insurance, there have been some recent problems in the area of title insurance. Just to review, when you take out a mortgage, one part of your closing costs will be title insurance. If you aren’t taking out a mortgage, you will not be required to purchase title insurance, but most buyers do and all lenders insist on it and expect buyers to pay. The premium for title insurance is a one-time charge and the policy protects the lender. You also can purchase owner’s title insurance to protect yourself but that is optional.

Title insurance covers third-party claims on a property that don’t show up in the initial title search and arise after the closing. The title company searches for public records related to your home to try to find any title defects that could affect the lender’s or buyer’s property rights such as liens, including tax liens or unpaid bills; easements that give others the right to use your property; and encumbrances like zoning laws and covenants imposed by homeowner associations. A “cloud” on the title can usually get resolved with the cooperation of the previous owner and/or the entity placing the lien.

In the wake of the National Association of Realtors settlement over real estate brokerage commissions, government officials are looking at compensation paid to real estate professionals who recommend title companies. This is happening without the knowledge or disclosure to the buyers who are paying the fees, therefore, potentially elevating the fees charged for the title insurance. The title insurance industry is under scrutiny by the federal government in an effort to lower the upfront costs of obtaining a mortgage.

The crackdown on partnerships with title companies is the same general trend as addressing brokers’ commissions. Just to be clear, this partnership arrangement with title companies is not happening all over, and carefully analyzing the title fees before you close a property is a wise thing to do.

Title insurance is just one more type of insurance a property owner needs to be aware of. We’ve turned the corner and it’s time to pick up the pieces and move on.

Reinsurance causing rate hikes

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

I know, not more talk about insurance, especially a week after the beginning of hurricane season. But if the Wall Street Journal can put it on their front page, I can report it.

Reinsurance is apparently the reason for the increase in insurance rates around the country. And if you don’t know what reinsurance is, like it or not, I’m going to tell you.

Simply, as if anything related to insurance is simple, reinsurance is insurance for insurers. Reinsurance lets insurers sell policies in vulnerable areas without the risk of being wiped out by a single disaster. The reinsurance market is a global entity that spreads the risk globally, allowing local insurance companies to provide insurance in risky areas, like Florida.

According to the Wall Street Journal, the reinsurance market is unregulated and is one of the major drivers of the high cost of property coverage across the country. Last year this came to a head after the reinsurance companies suffered a sharp drop in profits and started raising rates and cutting coverage at the start of last year.

This, of course, has had consumer advocates complaining that reinsurer profits have come at the expense of homeowners. The advocates have called for a federal reinsurance program, similar to the national flood insurance program, to protect consumers from unrestrained cost increases. The reinsurance industry says they’re the wrong target and are only responding to the increase in losses in the home insurance industry.

Wherever the blame lies, at least in Florida there is a round of reinsurance renewals currently underway, as well as in other high-risk states, that will help determine whether more premium increases are in the future. Interestingly, insurance brokers who are tracking a round of reinsurance policy renewals in June say they expect premiums to stay fairly level in Florida; we can only hope. However, there is some new money coming into the industry which may help to lower prices assuming this year’s hurricane season is overstated even though this year’s prediction is calling for the largest number of major hurricanes ever forecasted.

Since everything related to insurance influences the real estate market, the increased cost of reinsurance will be affecting the availability of home insurance. If there isn’t insurance available or the cost of the insurance is unreachable for buyers, it will slow the real estate market. Nevertheless, Lisa Miller, a Florida-based insurance adviser, indicates the 2024 reinsurance costs are going to be better.

We don’t usually talk specifically about reinsurance since the cost of it has always been built into our insurance company’s overall costs. But it is now becoming an issue on its own and hopefully will help explain to the average homeowner why insurance has gone up and what the future may hold.

The good news for us is across the country, approved home insurance rates are higher in Texas, Louisiana, Washington state and several more states than in Florida. The West, including California, is exposed to wildfires and the Midwest, tornadoes, both of which can be just as or more devastating than hurricanes.

I guess what I’m saying is there are no risk-free places to live, but some reasonable legislation or big brains should get together and see what can be done for the average homeowner. Think that will ever happen?

Florida insurance ground zero

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

We are on the brink of hurricane season and this year promises to be an active one, so what goes hand in hand with hurricanes? Insurance.

We’re talking here about homeowners’ insurance, although flood insurance is also slated to have increases over the next few years. FEMA is changing the way they calculate flood insurance and revising the factors used to determine their premiums.

High insurance premiums aren’t anything new to Florida. During the 2004 hurricane season, there were five named storms, bringing billions of dollars in damage to the state within a six-week period. After that, many private insurance companies left the state, leaving Citizens Property Insurance Corp., the state-sponsored insurer, as one of the few options.

Homeowners with mortgages, which is about 60% of all owners, are required to purchase property insurance. There are homeowners who have opted to go without insurance if they own their home free and clear or to self-insure. The average annual home insurance cost rose about 20% between 2021 and 2023 according to an insurance shopping site called Insurify, and they are projecting another 6% increase this year.

Why is this happening? Obviously, storms and the higher number of storms that appear in the Atlantic basin are increasing. However, the primary cause is the amount of fraud that has been going on in the state in recent years. In April of 2022, Florida Gov. Ron DeSantis called a special session of the Florida Legislature to address the issue of insurance fraud. At that time according to the Office of Insurance Regulation, Florida accounted for 79% of the nation’s homeowner’s insurance lawsuits.

Insurance companies reported $1 billion in underwriting losses in Florida in each of the last two years, much of it due to lawsuits that resulted when homeowners transferred their rights through the “Assignment of Benefits” form. Homeowners would sign a form transferring the full rights of the policy from the policyholder to the contractor, who was working with an attorney.

Once the rights are transferred, the attorneys pay the contractors, usually for roof replacements or repairs, then file a lawsuit against the insurance company, adding up to three times their standard rate. This type of fraud resulted in insurance companies reporting $1 billion in underwriting losses in Florida for the past two years.

The other generator of increased homeowners’ insurance costs is the increase in reinsurance. Insurance companies require their own insurance in order to write policies assuming some of the risk. Reinsurance has increased rates in recent years because of COVID-19, inflation and climate change.

On the positive side, Florida Senate Bill 2022-D has reined in the litigation of this fraud by 20%. This opened the door for private insurers to come back into the state and start stabilizing rates through competition and lower future premiums. In addition, Citizens Insurance has started the process of “depopulation” of their customers, who are starting to go over to private insurers.

Florida may have the largest hurricane risk in the world but we’re not alone. Homeowner’s insurance has gone up along with everything else all over the country. California in particular has issues because of the wildfire threat, and Louisiana is also one of the major targets for hurricanes coming up the Gulf of Mexico.

Ground Zero and our insurance problems may be overstated, but we are certainly volatile and subject to the whims of the weather. Again, the price we all pay for living on a sub-tropical coast.