At Harrell Agency, we write a lot of homeowner clients who are buying their first Florida home. Whether they are from up north, or even “across the pond", we see a lot of different people from different walks of life, but they usually ask the same question... “Why is homeowners insurance so expensive in Florida?” Today I'd like to offer a few reasons why, and maybe a couple solutions to the problem.
Natural Disasters
A lot of people don't realize that most Florida homeowners insurance companies have their own insurance policies. They are called reinsurance, and these policies are in place to protect homeowner's insurance companies against large disasters. Those reinsurance policies' costs are dictacted by not just hurricanes, but all natural disasters. To make matters worse, those reinsurance policies increase in cost the more natural disasters we have globally, not just in Florida. Since Florida is already such a high-risk state, most Florida homeowners insurance companies carry a lot of reinsurance. Unfortunately, that additional cost gets carried over to you, the consumer.
Hurricane Modeling
A new hurricane model released back in 2011 showed that Florida is at higher risk of wind damage than it has been in the past. This goes back to my first point about increasing the cost of reinsurance, and also causing your insurance company to buy more reinsurance.
Non-Hurricance Costs
A decent sized portion of your Florida homeowners insurance premium is due solely to the cost of fraud. Insurance fraud is a big problem in Florida, whether it be sinkhole fraud, roof damage fraud, or some other type of fraud. When insurance companies get stuck in the latest claim fraud scam, it costs them a fortune, and guess who that gets carried over to... Again, you!
So What Can We Do About It?
While Florida home insurance costs are high, there are ways to lower the cost!
First, if you are looking at purchasing a home, try to find a home that was built 12 years ago or more recently. If you can't find a home that isn't 12 years old or newer, have a wind mitigation inspection done. If the home has significant structural updates, it could save you up to 30% on your new homeowners insurance policy!
Second, lower your personal property coverage to 40% of your dwelling value. This could save you some money, and in a lot the policies we write, our clients don't need a lot of personal property coverage anyways.
Third, if the cost of homeowners insurance is killing you, you could look at increasing your 'all other perils' deductible. We usually write our policies with a $500 or $1,000 deductible, but if you are in a tough financial position, or you feel you are unlikley to file a claim in the event of a small loss, you could look into increasing your deductible to $2,500. That can sometimes save a you a decent amount of money!
We know homeowners insurance in Florida is super expensive, and even more complicated. That's why we are here to help you through the process. We write with many different insurance companies to try and find you the best deal we can with the coverage that you need!
