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Florida Insurance Crisis Offers Lessons for All Home and Auto Owners

Reports of a pandemic-induced Great Migration, it turns out, may have been greatly exaggerated — though not in Florida, where hundreds of thousands of transplanted residents have learned some hard lessons about the hidden costs of property ownership.  

According to the Palm Beach Post, “More than 547,000 people exchanged out-of-state driver’s licenses last year for ones with Sunshine State addresses. That’s a 40% increase from 2020 and nearly 20% greater than the five-year average between 2017 and 2021.” Driver’s license transfers are significant, the Post notes, because they indicate long-term relocation, rather than a temporary escape from colder climates or COVID-19-related restrictions. 

Some transplants may wish they’d spoken with their insurance agent or broker before making the move. 

In addition to paying soaring real estate prices, new Floridians and longtime Sunshine State residents alike are experiencing some of the highest insurance rates in the country. One Cape Coral, FL, homeowner said during a recent episode of NPR’s “On Point” — “Inside Florida’s Property Insurance Crisis” — that since she and her husband purchased their home in 2017, their annual Homeowners Insurance premium had climbed from $800 to $2,700. And their options of insurance companies willing to issue a policy on the home, she said, had dwindled from three to one. 

For a growing number of Floridians, the only option for Homeowners Insurance is the state-run Citizens Property Insurance Corporation, which is required by law to provide insurance for property owners who are unable to renew or obtain coverage from another provider. The number of homes insured by Citizens climbed from 453,911 at the end of April 2020 to 851,006 as of May 5, 2022, and last month the insurer requested the state to approve an 11% rate hike. 

The state’s insurance woes don’t end there. As Insurance Journal reported this week: 

“It’s not just homeowners insurance costs that are high in Florida. A new report shows that Floridians continue to pay some of the largest auto coverage premiums in the country. The BankRate 2022 report shows that the average auto premium in the state is about $2,762. That’s second only to Louisiana and $1,000 above the U.S. average.” 

Another unanticipated cost for many new Floridians? Flood Insurance. Although it’s advisable for most homeowners — even those whose property is outside a moderate-to-high-risk flood zone — to purchase Flood Insurance, many don’t unless their mortgage holder requires them to do so. For most Florida homeowners, Flood Insurance is required. 

Florida newcomers who had done due diligence before relocating had at least a good idea of what they were getting into regarding insurance. Most, if not all, found exorbitant premiums to be a worthwhile trade-off for not only great weather and beach access but also low property-tax rates and no state income tax. 

But for those who hadn’t done their research or spoken with their insurance agent? For many, the move to the Sunshine State has proved more expensive than anticipated, and a further crash course may be in store. Hurricane season officially begins June 1, and June also is the busiest month for tornadoes in Florida.  

Personal Insurance Considerations Where You Are 

While the severity of the insurance crisis in Florida is unique to that state, the situation there should caution homeowners and prospective buyers everywhere to look beyond real estate prices and tax rates, and inform themselves about insurance requirements, costs and exclusions. 

In a recent Kiplinger report, “Insurance Can Make or Break Your Financial Plan,” the publication noted, “You could be one bad accident, storm or lawsuit away from disaster unless you have the right insurance. From Umbrella to Uninsured Motorist, Flood and Excess Liability, it could take a few different types of policies to get the job done.” 

For example, Homeowners Insurance policies in 19 states and Washington, D.C., include deductibles specifically for wind damage, as detailed by the Insurance Information Institute. If windstorm damage is partially or completely excluded from your Homeowners policy, as Forbes Advisor reports, you can typically get wind insurance as an endorsement to the policy, as a separate windstorm and hail policy or through your state’s FAIR or Beach plan.  

Many homeowners outside Florida and other coastal areas are unaware that flood damage is not covered by standard Homeowners Insurance, while others are aware but believe they don’t need Flood Insurance. As the Lending Tree website ValuePenguin reports, however: 

No property has zero risk of flooding: In fact, approximately 25% of all flood insurance claims are made in low-to-moderate flood risk areas. In these areas, homeowners qualify for FEMA's preferred risk policy, available at cheaper rates as low as $129 per year for dwelling and contents coverage.” 

Flood Insurance is coverage you should at least discuss with your agent or broker. In fact, if your agent or broker hasn’t already introduced the topic, it may be time to get a new agent or broker. 

And when scouting out prospective places of residence, keep in mind those Auto Insurance rates. According to NerdWallet, the average cost of full-coverage Auto Insurance is $1,630 per year. If you live in Louisiana that may seem like a bargain. If you live in Maine, it might appear larcenous. Louisianans pay an average of $2,986 in annual auto premium for full coverage. Mainers on average pay a mere $1,074. 

P&C Market Outlook Entering 2022  

In December 2021, Alera Group published the Property and Casualty 2022 Market Outlook, a comprehensive examination of the factors behind market conditions and forecast of the P&C landscape going forward, with recommendations on securing coverage and managing costs.  

The Market Outlook includes analysis of individual industries and lines of coverage. Here’s what we had to say in the whitepaper’s section on personal lines of insurance coverage: “Although the personal lines market is sufficiently capitalized, the outlook for buyers varies widely by region and product. Uneven underwriting results and diverse exposures will affect availability and pricing.” 

We saw these as the most significant factors influencing the market for coverage:  

  • Automobile rates will continue to rise in virtually all regions. An increase in the frequency of losses to pre-pandemic levels, higher repair and replacement costs, and supply chain and vehicle manufacturing shortages will drive rates higher in 2022. 
  • Homeowners availability and capacity will vary by region. Coverages will be broadly available in non-catastrophe-prone regions. Price increases will reflect inflation-based construction and repair costs, as well as an effort to increase insured property to full replacement-cost value. The high-net-worth buyer with a clean claims history located in a non-disaster-prone community will have ample capacity, access to markets and pricing increases reflecting inflationary construction costs. 
  • Catastrophe-prone regions will be most severely affected. For homeowners in wildfire, windstorm and hurricane-prone areas, coverage will be less available, more costly and subject to increased underwriting scrutiny. Buyers in these regions can expect rate increases to be as much as double their expiring rates, higher deductibles and more limited replacement cost coverages. 

Since publication of the Market Outlook, conditions for consumers have only gotten worse, making risk control and collaboration with your insurance agent or broker all the more important. Inflation — some of it due to supply-chain issues that have made obtaining auto parts and building materials more difficult and more expensive — has exacerbated the already hard market for property and casualty insurance.  

What You Can Do 

Forbes Advisor recently published these tips for buying homeowners insurance

  • Assess your rebuilding costs. Ask your insurance company or a known contractor how much it would cost to rebuild your home with similar materials, based on labor costs in your local area. You want your dwelling coverage amount to be equal to this estimate. 
  • Review the advantage of replacement cost over actual cash value. Consider replacement cost coverage for your home and belongings — you will get the amount you need to replace your home and items with new versions instead of a depreciated amount. 
  • Consider add-on coverage for your expensive items. If you have high-value items, antiques or pricey sports or musical equipment, determine if scheduling personal property to receive extra coverage is what you need 
  • Evaluate your liability coverage needs. Make sure you buy an amount that matches your assets, which could be taken from you in a lawsuit, or at least $300,000. 
  • Assess coverage gaps. Some home insurance companies offer add-on endorsements to cover items your standard policy does not. For example, pay for damage from water or sewer backups, or provide higher limits for landscaping if damaged by theft or fire. 
  • Check financial ratings. Research financial strength ratings from companies such as A.M. Best or Standard & Poor’s. Some financial institutions won’t approve your mortgage unless your insurance company has at least an “A” financial strength rating. 
  • Ask for discounts. It never hurts to ask if you’re getting all the discounts that you’re eligible to attain. For example, you may get a discount for smart home features, like flood sensors, or for buying home and auto insurance from the same company. 
  • Compare quotes from multiple insurance companies. The price for the same policy can vary greatly among insurance providers. Shopping around gives you peace of mind that you found the best policy for the best price. 

A good agent or broker can make a tremendous difference in the quality of your insurance program and how much you pay for it. If yours isn’t addressing the actions Forbes Advisor suggests, you may be paying too much for too little coverage. 

To contact an Alera Group agent or broker about updating and customizing your personal insurance program, click on the link below. 

CONTACT AN ALERA GROUP PERSONAL INSURANCE SPECIALIST 


About the Author 

Deanna Blanch 
Personal Lines Supervisor 
Avon-Dixon Insurance Agency, An Alera Group Company 

Deanna Blanch has more than 20 years of experience in serving clients and providing solutions for their personal insurance needs.  

Contact Information: 

 

The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such. Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice. This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.  

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