The Dark Cloud Over the Sunshine State

Recently, for more reasons than the weather, northerners have been moving down to Florida. And for those of us who have either already made the plunge or are seriously considering it, you certainly cannot come up with too many arguments against the trend. Benefits include good weather, lower taxes, better exercise alternatives in the winter months and sunshine to name a few. But there is one dark cloud hovering over the Sunshine State. That cloud is the increasing cost of homeowners insurance and, in many cases, the inability to obtain such coverage from any of the quality carriers admitted in the state. 

There is a logical reason for this dilemma. For instance, during the first three quarters of 2020 alone, Florida’s domestic property insurers reported approximately one billion dollars in underwriting losses (1). Made up of many smaller Florida-based insurers, the companies have been haunted by catastrophic events and litigation over the last several years. Additionally, affluent carriers that have a national footprint and typically cover homes with replacement values above one million dollars have also experienced underwriting losses for the same reasons. While Florida does deliver a path to paradise, during the hurricane season it can sometimes deliver a storm that leaves lifelong memories. And hopefully, you are not there to experience the event!

The high-priced insurance market is certainly not a reason to defer an otherwise happy and wise decision to relocate to Florida, even if only for the winter months. But there are some suggestions that would assist you in acquiring quality coverage from a carrier that will be there when you need it. Following are some suggestions when identifying a property and some insight as to some of what some of the best affluent carriers are looking for:

• A family with a clean claims history and financial stability.
• A bundled account, meaning all lines of coverage (Auto/Home/Umbrella, etc.) are covered with the carrier, including for the primary residence and affiliated policies. [Most affluent carriers will be more competitive when they have a bundled account and will not consider coverage for the secondary home without covering the primary home.]
• Minimum dwelling limits for all primary homes.
  • Secondary homes can sometimes carry a lower limit, when included as part of an existing package where the primary home is also covered.

For those who want to live closer to the water and who want to invest in wind coverage, the requirements become much stricter. 

• It matters what county you are in and how close you are to the water. The closer to the coast, the more stringent the requirements for coverage.

• The date the home was built, and the construction codes in effect when the home was completed matter significantly. Florida’s building codes have been updated several times over the past decades resulting from what we have learned about new building practices and materials to assist in mitigating wind and affiliated damage. 
• The elevation of the home (Above sea level) will make a difference as to whether flood coverage is required and to determine if the insurer will accept the risk at all.
• The condition of the home matters. Most quality insurance companies will inspect the home and make suggestions when the home requires updating or alterations to comply with underwriting guidelines. (Roofing and opening protection are two common areas addressed.)
• A wind mitigation inspection report is commonly required by the insurer to be sure that appropriate building practices and affiliated protective attributes (Hurricane shutters, etc.) are employed.

Flood insurance is required often, depending upon the specific location. While many people don’t anticipate a loss from a flood, there are currently 4.3 million homes across the US with substantial flood risk. If all those homes were to be insured through the National Flood Insurance Program (NFIP), rates would have to increase 4.5 times to cover today’s risk, which amounts to approximately $20 billion. Due to the impact of our changing climate, new research suggests that for the 4.3 million homes with substantial flood risk today, we will see it grow to approximately $32.2 billion in 30 years (An increase of 61%) simply as a result of climate change (2). And, even though the NFIP does not cover all those properties, it has lost more than $36 billion since its inception and will undoubtedly have to go through further reforms to remain relevant for future coverage options. FEMA, which runs the NFIP, is working on new flood maps and on individual property level pricing to accurately reflect the risk resulting from the many changing conditions contributing to flood losses (3).

The moral of the story is that flood rates will not get any cheaper for homes in areas where floodwaters are likely. Private insurers also provide coverage and they too will have to deal with the increased risk.

While this is only a summary of some of what you’ll need to consider regarding insurance for a Florida home, it won’t deter many from making the plunge. If you are considering a move to the sunshine state, use this information to search for a home and don’t let the “Dark Cloud” hover over your house.  There are many details to discuss, and we can assist, so call on us when you are ready to take the plunge.

Sources: Florida Office of Insurance Regulation,  FEMA Risk Rating 2.0 initiative, which will set new premiums for properties inside and outside of Special Flood Hazard Areas (SFHA),  Insurance Journal March, 2021