Like many other parts of the United States, Floridians build homes in places that increase their exposure to risk. For example, between 1980 and 1993 alone, the state’s coastal population grew by 37%. During that same time period the value of Florida’s coastal residential property increased by 135% and commercial property grew 192%. When Hurricane Andrew struck in August of 1992, 78% of the state’s population lived in exposed coastal areas. In the aftermath of the storm, Florida property and casualty insurance companies were faced with over $16 billion in insured losses!
Up until that point, Florida insurance companies had thought such a calamity highly unlikely. As a result, they had not prepared for the unprecedented level of loss. Many insurers reacted to it by either withdrawing from the Florida insurance marketplace or significantly reducing their exposed risk with more stringent underwriting standards.
At the same time, the Florida Department of Insurance and the state legislature took steps to make sure homeowners and businesses would have access to affordable insurance. Their solution was to grant the big insurance companies the authority to spin off special companies that confined their risk pool only to Florida. Under this scheme, the companies could assess risk and increase rates based on a consolidated geographic area rather than cast a wider net for risk. In 2002, they created the state government-owned insurer of last resort, Citizens Property Insurance Corporation. They also encouraged new insurers to enter the market. These companies cherry-picked individual policies from Citizens and sent offers to write those policies to the insured. Initial rates were similar to those offered by Citizens, but renewal rates often went up 30% or more. Unfortunately, many of these insurers were under-funded. Eventually, the state Insurance Commissioner declared many of them insolvent, leaving Floridians with the choice of state-run Citizens or no insurance at all.
Citizens Property Insurance Corporation currently has some 1.4 million policies in force and writes more than 5,000 new policies each week. If Citizens were to become insolvent, Floridians would be liable for making up the losses resulting from a major hurricane or series of destructive storms. By state law, Citizens is required to charge premiums that are high enough to cover a 1-in-100-year hurricane without using bonds or assessments to help make up for losses. For Florida homeowners forced to choose this option, that could mean ever-increasing rates.
How to Find Affordable Homeowners Insurance in Florida
Stay informed about insurance legislation. As of August 1, 2011, Governor Rick Scott had embraced a suggestion from the board chairman of Citizens to consider privatizing the insurer. The very best long-term solution is to contact your state legislators and let them know where you stand on this and other homeowners’ insurance issues.
Seek out every available discount. You may have trouble finding a multi-policy discount (few Florida companies write both homeowners and auto insurance at this time), but there are other discounts you should look into such as those for installing home security systems. You should also be aware that Florida law requires insurance companies to offer discounts or credits for existing building features or home improvements that reduce hurricane damage and loss. Since the wind portion of your Florida premium can be between 15% and 70% of the total, making necessary improvements can result in savings. To learn what types of features qualify, check out the Wind Insurance Savings calculator here.
Use the state government’s agent locator website at FAIA to find agents who write homeowners’ insurance in your zip code. Deal only with reputable, solvent insurance companies. You can easily check a company’s financial standing at rating services such as A.M. Best Company. You can also check with your local Better Business Bureau to see if complaints have been filed against a company. The Florida Office of Insurance Regulation ( FLOIR ) is another excellent resource. To verify the validity of an insurance company use the Better Business Bureau’s website to search by state or city. Comparison shop and look at as many quotes as possible to find the policy that meets your needs and your budget. That’s easy and free with EINSURANCE’s homeowners quotes. If you can, pay the premium annually. Insurers typically charge more for incremental payments.