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Insurance rates going down?

Written by Louise Bolger on . Posted in Business, Real estate | Development.

There’s a lot of reasons not to want to think about insurance. It’s expensive, confusing and boring. However, according to those in the know, Florida insurance rates may be starting to tick down or at least stabilize.

Floridians have faced major increases in their homeowners and automobile insurance premiums in recent years. Florida also ranked as one of the worst states in the country for lawsuit abuse and our courts were flooded by frivolous claims. Our out-of-control litigation rules were a major reason that insurance premiums for both homeowners and automobiles were among the most expensive in the country.

It was so bad in Florida that in 2019 about 8% of all homeowners’ claims filed in the U.S. were filed in Florida. In addition, according to the National Association of Insurance Commissioners, Florida accounted for 76% of all claims that turned into lawsuits that year. Why would any insurance company want to do business in Florida?

The property insurance market was in a crisis and the Florida legislature acted to end frivolous lawsuits and abusive tactics by lawyers, while protecting people with legitimate legal claims. The regulatory authority was enhanced and penalties were imposed on any insurer that failed to pay customers’ claims properly and promptly.

The benefits of these reforms are now kicking in. Florida’s Office of Insurance Regulation announced in February that nearly two-thirds of automobile premiums are declining between 6% and 10.5% this year and more is expected.

Homeowners’ insurance rates are also on the right track. According to S&P Global, Florida premiums only increased 1% on average. This was the lowest rate of increase in the nation and well below the rate of inflation. This bodes well for the future with the hope that further stabilization will make insurance premiums more affordable in the years ahead. Having a healthy insurance market means everything to the value of properties, as well as aiding current homeowners and potential buyers to enter into a more affordable position.

Time to review the April sales statistics for Manatee County published by the Realtor Association of Sarasota and Manatee: Single-family homes closed 1.9% fewer properties this April compared to last. The median sale price was $464,000, down 12.5%, and the average sale price was $618,422, down 13.9%. The median time to contract was 50 days, compared to 44 last year, and the month’s supply of available inventory is 5.2 months, compared to 3.9 months. New listings were up 14.1% and new pending sales were down 3.2%.

Condos closed 1.1% fewer properties this year, the median sale price was $300,220, down 14.8% and the average sale price was $343,558, down 21.1%. The median time to contract was 63 days compared to 44 days last year and the month’s supply of available properties was 8.2 months compared to 6.3 months last year. New pending sales were down 8.3% and new listings were up 8.1.

These numbers are showing a stabilization of the market, meaning the declines are not as significant as they were previously. The Realtor Association still maintains “that the data reflects a market in transition, characterized by a stabilizing inventory, softening prices and a steady sales activity.”

Finally, Florida is setting the groundwork for other states to follow. Georgia and Texas are also considering legislation similar to ours. Whatever helps to improve our real estate market is fine with me, even if it’s boring.

Castles in the Sand

Back to the real world

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

We’re well into January, so it’s time to get back to the real world and one of the real world’s less exciting topics is homeowner’s insurance. Most of us want to go kicking and screaming away from the topic of insurance, especially in Florida which has the highest insurance premium rates in the country, but with the new year, we have some new legislation likely putting you in a much better mood.

Last month, the governor signed legislation to prevent the state’s property insurance market from collapsing under a tidal wave of lawsuits. Not only does this significantly help the state’s budget, but it may also help every homeowner’s budget in Florida as well.

Previously, Florida law has allowed policyholders who want to avoid dealing directly with their insurance companies to assign their claim benefits to contractors who work with trial lawyers. The contractors would often inflate fees, resulting in rejections by insurance companies. Then the attorneys would sue insurers to obtain what they say are legitimate charges, put- ting the insurers in the position to pay the attorneys’ costs if they lose a case. This resulted in insurers being inundated with frivolous lawsuits and passing this cost on to their customers to cover legal costs and risks. Florida insurers had more than 100,000 lawsuits last year, compared to the other 49 states totaling only 24,700.

Many insurance companies have failed and left the state recently and others are also leaving the market because they can’t obtain reinsurance. The new legislation eliminates the assignment of benefits and the requirement that insurers pay plaintiffs’ attorney’s fees if they lose. It also sets up a $1 billion state reinsurance fund to help insurers. The state-backed Citizens Property Insurance Corporation, the “insurer of last resort,” will also benefit from the legislation. Homeowners with Citizens policies will be required to accept private coverage from an insurer that offers premiums within 20% of their current Citizens policy. Overall, it could take a while, but the legislation could result in more private companies entering the Florida market with competitive rates benefiting homeowners.

None of this new legislation, however, will help homeowners who are going to war with both their homeowner’s insurance company and their flood insurance carriers in the wake of Hurricane Ian. Floods and the resulting insurance claims are not as clear-cut as they may sound. The definition of flood damage as opposed to wind damage can be interpreted differently by different insurers. This is already resulting in litigation from homeowners who say their carriers aren’t honoring their claims and the insurance carriers saying they aren’t legally obligated to cover the claims.

Trying to distinguish between flood and hurricane damage is more of a challenge than homeowners ever expected. Homeowners are stuck in the middle while insurance companies try and parse what exactly their responsibility is. Measuring how high water rose on the walls of an existing house is one thing but what if the house was built on a slab and it’s gone? Was it the flood or was it the wind?

The fact that just over 40% of the Florida homes in the two coastal counties hardest hit by Hurricane Ian are covered by flood policies doesn’t make it any easier for anyone since these homeowners may be looking to their homeowner’s insurance carriers for compensation. I guarantee a lot of this will end up in court and no one will be happy with the outcome.

Remember when living on the coast in Florida felt like you weren’t actually living in the real world? Well, the real world has invaded us, and its name is insurance.

Castles in the Sand

Who’s entitled to title insurance?

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

As discussed last week, everyone needs homeowner’s insurance and an adequate amount. And of course, if you own a vehicle you need insurance on that as well. But what about this title insurance thing on your real estate? Do I need it, must I have it and what exactly does it insure?

When you purchase a property as a part of the closing procedure there will be a title search to verify you have clear title to the property. The title search reviews all the instruments, conveyances, public records and court proceedings to discover any material facts related to the title of a property. The search ensures that the “chain of title” is intact and that all liens, including mortgage liens, are satisfied at closing.

So, if everyone is doing their job why do we need title insurance? Nothing is perfect and there are many ways in which a clear title may not be so clear. Relatives of the previous owner, utility companies, government liens and contractors who may not have known about the sale of the property and did not have an opportunity to file a lien before the sale could all be given consideration after the sale. Even a simple misspelling could reveal a claim against the property.

Because of the unlikely but feasible event of one of these claims popping up after the sale, title insurance was invented in the mid-1800’s. It has since become the dominant method of protection for buyers and lenders and will pay for losses sustained by the new owner or their lender and will kick in to defend any ownership claims against the property.

If your home purchase involves a mortgage, virtually every lender will require you to purchase a title insurance policy just like requiring you to purchase a homeowner’s policy, so their interest is protected. This policy will protect the lender’s financial interest in your property as well as lender legal fees should that be required.

Some lenders also will require you to purchase an “owner’s policy” which you should do even if it’s not required. An owner’s policy is designed to protect the equity in your home as well as legal fees and other losses should the worst happen. For example, let’s assume the courts decide that a long-lost relative is, in fact, the house’s true owner. The lender’s policy will reimburse the lender for what you owe on the mortgage, but you’ll be out the amount of your down payment and other principal payments, not to mention that you will likely have to move out unless you purchased an owner’s policy. In addition, extended coverage policies are available for an additional cost if you and your legal advisor feel this is something you should purchase.

And like all things real estate there are exclusions and exceptions to the rules. A title insurance policy does not cover police power of the government such as zoning, building restrictions, setback requirements, and the rights of eminent domain (the power to take private property for public use by the state). Typically, it does not cover liens or encumbrances attaching to the property after the policy date.

Your attorney or closing agent working on behalf of an attorney will make the title search and title insurance less confusing at the closing table. It’s always important to be prepared beforehand so you know the right questions to ask and to make sure you’re purchasing the best possible insurance to protect your rights and money.

Bottom line, we’re all entitled to title insurance and we should all have it.

More Castles in the Sand

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Management of condominium associations

The fastest way to kill a sale

Castles in the Sand

Are you underinsured?

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

My least favorite topic to talk about and write about is homeowners’ insurance. I’m not much for burying my head in the sand, but when it comes to insurance, I accept on blind faith whatever my broker tells me, something that I would advise clients not to do. So even though we’re already well into hurricane season, it can’t hurt to review a few basics.

The first big basic and to my mind, the most confusing is the 80 percent rule and replacement value. The 80 percent refers to the fact that most insurance companies will not fully cover the cost of damage to a house unless the homeowner has purchased insurance coverage equal to at least 80 percent of the house’s total replacement value. In the event that a homeowner has purchased an amount of coverage less than the minimum 80 percent, the insurance company will only reimburse the homeowner a proportionate amount of the required minimum coverage that should have been purchased.

For example, the replacement value of your home is $500,000, the insurance purchased is $395,000, a hurricane blows in and does $250,000 of damage. However, because you did not purchase the full 80 percent of replacement value, which should have been $400,000, you will not be fully reimbursed, and there is a specific calculation to determine this figure. This 80 percent rule is one reason why insurance policies should be reviewed by you and your insurance broker and company to adjust for improvements and escalating replacement costs.

Also, in Florida and other states that are under the threat of hurricanes, homeowners’ policies are written with an annual hurricane deductible. For most policies, this deductible is 2 percent. This, of course, is in addition to your normal homeowner’s deductible.

The other big factor affecting our area is flood insurance. If you don’t have it, get it, even if you are not mandated by a mortgage lender. Flood insurance is purchased from the National Flood Insurance Program through approved brokers and is subsidized by the federal government. The maximum amount of coverage is $250,000 for damages and $100,000 for contents. The federal flood insurance program has been in flux for several years. Even though the government is in a loss position for this program, it is still trying to find a way to increase rates without devastating homeowners’ and property values.

Finally, as I discovered last year after Irma, condos have an item in their homeowners’ policies called loss assessment coverage, usually on the back of the declaration page. Loss assessment covers an assessment of your condo association levies on homeowners to cover damage to the common areas of the association, which may be within the 2 percent hurricane deductible range of the association’s insurance. The caveat with loss assessment coverage is the maximum coverage is $2,000, as mandated by the state of Florida, generally with a $250 deductible.

Since usually, the worst months for hurricanes are September and October when the Gulf waters really heat up, you still have time to make some changes. Remember if there is a named storm that’s being tracked, you can’t purchase insurance or make changes until that storm has passed.

Bottom line is don’t follow my lead. Get your head out of the sand and read over your homeowner’s policy as tortuous as it is.

More Castles in the Sand:

Management of condominium associations

The fastest way to kill a sale

Property values, taxes always hot topics