Property Insurance Costs are Pricing People Out of Paradise

Property insurance costs are pricing people out of paradise.Photo byGary RunnonUnsplash

Heat index numbers are not the only thing rising in Florida.

The state of Florida, known for its picturesque beaches, vibrant culture, and endless sunshine, has always been a dream destination for homeowners. We have all daydreamed about sipping cocktails on Florida's golden beaches or watching the palm trees sway in the warm breeze. Yet, beneath this charm lies a daunting challenge casting a shadow over Florida's real estate market - the property insurance crisis!

Whether you have a sweet home in Florida or are a prospective buyer, the property insurance crisis has left you grappling with uncertainty and soaring premiums. Unfortunately, this unexpected storm threatens to dampen your dreams of ownership and leave you with unforeseen burdens.

As a local lifetime Florida resident, property owner, and manager, I will discuss the restless struggles with property insurance brewing under the Florida sun. I will shed light on the challenges homeowners and buyers face in the Sunshine State. Additionally, I have something special for you - a roadmap of valuable tips to help you navigate the current situation of property insurance.

The once-stable landscape of property insurance has been shaky, leading homeowners into a tough bind.Photo byTowfiqu barbhuiyaonUnsplash

Property insurance dilemmas

In Florida, homeowners have traditionally enjoyed a luxurious coastal lifestyle. However, the reality of steeply rising premiums has taken center stage now. Let's find out what are the major substantial hurdles in Florida that both buyers and homeowners have to face:

Rising premiums

The alarming trend of rising premiums in real estate is no less than a worry for homeowners in Florida. The once-stable landscape of property insurance has been shaky, leading homeowners into a tough bind. Owners have a difficult choice: either cough up these sky-high premiums or risk being uninsured.

In some cases, premiums have skyrocketed, doubling or even tripling within a relatively short time. The Insurance Information Institute's data highlights that the average cost of home insurance across the country is $1,700. However, the figure has surged to a staggering $6,000 in Florida, marking a 42% increase from the previous year and an alarming 100% surge over the past three years.

Furthermore, many homeowners in Southwest Florida claimed that they still can't rebuild from Hurricane Ian as they have been paying high premiums for years. One noteworthy consideration is that the premium increased over 40%-50% after house owners renewed their policies again this year.

The critical situation is broader than just homeowners. Perspective buyers are being hit as well.Photo byHutomo AbriantoonUnsplash

Real estate policies are vanishing.

The critical situation is broader than just homeowners. The buyers seeking insurance coverage for new properties are also facing significant challenges, such as a substantial shortage of houses, a surge in property prices, complexity in property transactions, etc.

Moreover, the landscape of the Florida insurance industry itself has transformed. Over the last few years, the Florida insurance industry has also seen smaller insurers vanish. Within this span, eight smaller insurance companies have declared bankruptcy in the state. In the first half of 2023, 18 out of Florida's 110 insurers were placed on a watch list, with two being "enhanced monitored." In fact, in total, 18 companies are now under heightened supervision. The pain is real.

And guess what? This sudden vanishing act of insurance providers is crucial to our ongoing crisis story. Natural catastrophes, like hurricanes and other billion-dollar disasters, cause a severe dent in construction costs.

Insurance companies are feeling the heat, so they have started playing safe by limiting coverage or pressing the "pause" button on new policies. And this isn't just in Florida; it's a nationwide trend. Florida insurers in states like California and Louisiana are also canceling policies. According to a report, more than a dozen insurance companies have stopped writing state policies– a significant threat to potential homebuyers.

Mark Friedlander, a spokesman for the Insurance Information Institute, said, "56 property insurance companies were operating at the start of 2023, but now only 47 are offering their policies."

Another shockwave for Floridians

Farmers Insurance - one of America's biggest home insurers – has recently departed from the Florida market, which has shocked the whole state's real estate landscape. This move isn't just a tiny ripple; it affects around 30% of the policyholders they had in Florida. Existing policies will remain active until they expire, followed by a nonrenewal.

You can clearly understand the reason behind the departure of such a prominent company. In a statement, Farmer declared that their decision centered on risk exposure in the hurricane-prone state. At the same time, this departure has created restlessness among homeowners and buyers, which made them seek alternative insurance options and potentially face limited choices. For instance, around 12 percent of homeowners in the state still needed to get property insurance. Compare that to the national average of just 5 percent.

"We're hearing from realtors that are extremely concerned that they cannot close on properties they are selling because the homeowner will be unable to obtain property insurance to make that sale go forward," said Mark Friedlander, spokesman for the Insurance Information Institute.

A climate of uncertainty

You may already know the connection between Florida's current home insurance and climate crises. Florida's location places it in the path of a diverse range of natural hazards, with deadly hurricanes, flooding, and sinkholes. The state's vulnerability to more frequent and increasingly severe natural disasters has significantly shifted how insurance companies assess risk.

Risk assessment test results have led to higher premiums and reduced coverage options available to homeowners. In the current landscape, the average cost of insuring a $250,000 home in Florida is $1,981, a notable contrast to the national average of $1,428.

"A lot of insurers have been losing a lot of money in Florida and they've been threatening to leave for years," said Daniel Schwarcz - a professor at the University of Minnesota Law School specializing in insurance.

Tips for Florida homeowners and buyers

Facing the property insurance crisis head-on is a challenge. But fear not – there are practical strategies that you can employ in this uncertain situation whether you are a homeowner or potential buyer:

Shop around

Despite the current difficulties, many insurance providers are ready to provide coverage. You can make the most of online tools, collaborate with insurance brokers, and engage local agents to explore various options. Doing so will increase your chances of finding a policy that suits your needs and budget.

Mitigate risks

Take proactive measures to safeguard your property against potential risks. For this purpose, you should strengthen your home's structural integrity, install storm shutters, and invest in flood prevention measures that could reduce your insurance premiums.

Know your policy inside out.

Continually review and comprehend the terms of your insurance policy carefully. Please familiarize yourself with coverage limits, deductibles, and exclusions to ensure a crystal-clear understanding of your investment.

Bundle up for savings.

Consider bundling your property insurance with other policies, such as auto insurance, thus opening the door to valuable discounts and cost savings.

Be a voice for change.

Lastly, stay informed about ongoing legislative initiatives and advocacy groups addressing Florida's property insurance crisis. Connect with local representatives to express your concerns and advocate for reforms to make insurance more accessible and affordable.

Final words

As the Florida sun continues to shine, the stormy clouds of the property insurance crisis loom large. One of the underlying issues contributing to the property insurance crisis in Florida is what some experts have coined the "weather tax." According to AP News, this refers to the higher costs associated with insuring homes in disaster-prone regions like Florida.

At this moment, homeowners and prospective buyers need to navigate through this challenging landscape with resilience and strategy. That's why it's wise to understand the trends, explore options, advocate for change, and secure your land under the Sunshine State's sky.

"These are the first steps toward a stable market environment but it may take several years to see improvements due to the treacherous conditions Florida consumers and insurers have faced for so long."- Mark Friedlander, ,Insurance Information Institute.

This article is for informational purposes only. It should not be considered financial, real estate, or legal advice. The market fluctuates; therefore, not all information will remain the same. Consult a financial or real estate attorney before making significant real estate decisions.