Friday, March 17, 2017

Why Are Florida Homeowners Insurance Rates So High?

If you've just moved to Florida from another state, you've likely noticed that Homeowners Insurance rates here are higher, about twice the national average. The Florida home insurance market is unique for several reasons. Here's why Floridians pay more:

Natural Disasters

Even though Florida hasn't been devastated by a major hurricane since 2005, we still have more other natural disasters than other states. Thunderstorms, hail, tornadoes and sinkholes are all more common in Florida. Sinkholes, in particular, are extremely costly for insurance companies. These events contribute to the high cost of reinsurance. Reinsurance is the extra layer of protection that insurance companies purchase to pay catastrophic losses. It's your insurance company's insurance policy, so to speak.

Revised Hurricane Modeling
The 2010 wind-estimate model developed by Risk Management Solutions was a significant departure from previous models. This new model shows that Florida insurers are much more vulnerable to wind losses in inland Florida counties than previously thought. In response, Florida insurers increased the amount of reinsurance they carry. Higher reinsurance costs get passed along in the form of higher premiums.

Assignment of Benefits (AOB)
AOB is a mechanism by which homeowners sign over their insurance policies to the contractors performing the repairs. The system is rampant with fraud, with many contractors attempting to pad or falsify claims in order to collect from insurers. Even worse, in Florida, when lawsuits are filed in these cases, the insurance company is typically responsible for attorney's fees. Increased costs associated with AOB claims and lawsuits are a major problem in the Florida market.

Post-2005 Market Fluctuations
The 2004/2005 Atlantic Hurricane Season changed everything about the Florida market. National insurance companies left the state entirely, and many smaller, Florida-based companies folded altogether. As a result, premiums increased due to lack of competition (and the recent hurricanes themselves, of course). A few years and no major hurricanes later, brand-new insurance companies began cropping up in Florida. By 2015, the market was saturated, and rates were artificially low, sometimes dangerously low for the level of risk. This was an attempt by new companies to build their book of business quickly. For some, it backfired. For others, they gained a foothold, but they had to increase rates to do so.

At Viera Insurance Agency, we always strive to provide the best value policy for our clients, and we understand that the high cost of homeowners insurance in Florida can be frustrating. There are steps you can take to lower your rate:

1. Shop for a home with these characteristics: 
  • Masonry Construction (Concrete Block)
  • Newer than 2002 (OR at least with a roof newer than 2002)
  • Furthest from the ocean is best
2. Have a Wind Mitigation Inspection: That newer roof that we mentioned will have wind-resistant features that will save you money on your policy.

3. Consider increasing your deductible: A $2,500 deductible might be a significant savings over a $1000 deductible.

We know homeowners insurance in Florida is expensive and complicated. With over 50 companies to shop for you, we are here to help!


Wednesday, January 18, 2017

Water Damage and your Homeowners Policy: What's Covered

Water damage is one of the most common causes of loss in Florida homeowners insurance claims. Though most insureds expect their policy to protect them against any and every type of water damage, this is not the case. There are exclusions and limitations that you need to understand before you experience a water loss.

Full Water Damage Coverage
The water damage coverage that is included with most homeowners (HO) and landlord (DP) policies. Damage must be sudden and accidental, such a a pipe burst, appliance malfunction, or water coming through a hole in your roof caused by a storm. With full water damage coverage, your policy will pay up to the total policy limit, minus your deductible.

*A note on 'sudden and accidental': Maintenance issues or preventable losses are generally not covered. Examples would be damage caused by a leaky roof or pipe or by a worn-out dishwasher. It is the homeowners responsibility to maintain the home and take reasonable steps to prevent damages. 

Limited Water Damage Coverage
This is becoming increasingly common, as water claims continue to increase. Many insurance companies exclude water damage altogether for homes over a certain age (usually 30 or 40 years), and then offer the option to purchase limited water damage coverage. This 'buyback' usually has a $10,000 limit. 

Flood Exclusion
Flood is defined as rising water, or water that touches the ground before it comes into contact with your home. Flood is almost always excluded on HO and DP policies, and must be purchased on a separate flood insurance policy, or less commonly, as a flood endorsement that can be added to your homeowners policy. If you don't have either the endorsement or the separate flood policy, you will not be protected against rising water. This is true whether or not the floodwaters are driven by wind. 

Seepage Exclusion
Seepage is generally considered to be a maintenance issue, and will usually not be covered by an HO or DP policy.

Water & Sewer Backup Exclusion
This exclusion refers to water that backs up through sewers (like from a toilet bowl), or from drains (like from a sink). The exclusion applies whether the damage is caused by a public sewer or water system, or by water inside the home. Most insurance companies offer an inexpensive Water Backup endorsement that can be added to your policy in order to remove this exclusion, and it is highly recommended.

It is important to discuss your water coverage in detail with your agent. Please let us know if you have any questions.

Thursday, June 23, 2016

Admitted vs Non-Admitted Insurance Carriers: Which is Better?

Most insurance is placed with Admitted (also called Standard) insurers, but there may be situations in which a particular risk is placed with a Non-Admitted (also called Excess or Surplus) insurance carrier.

An Admitted carrier is required to be licensed in every state in which it writes policies. It must also obtain state approval for all forms and rates. Admitted carriers are required to contribute to the state guarantee fund, which is used to pay for losses if an insurer becomes insolvent or is unable to pay the losses due to their policyholders.

A Non-Admitted carrier is usually only licensed in one state, and though it must receive approval from every state in which it does business, its policy forms and rates are not regulated by the states. Non-admitted carriers are not required to contribute to the state guarantee funds, as they are not protected by these funds.

Non-admitted carriers are used for difficult-to-insure risks. This may include risks with prior claims, unacceptable features that do not meet admitted company underwriting guidelines, or unusual exposures that do not fit conventional policy forms. Because the rates are not state-regulated, the non-admitted carrier can price each policy independently for the specific type of risk. This sometimes results in lower rates than what an admitted company could offer.

Typically, in order to be eligible for a non-admitted policy, a risk must have been rejected by three standard carriers. Also, the insured must sign a form stating that they understand that coverage is being provided by the non-admitted market, and that any claims will not be guaranteed by the state.

It is important to note that just because a carrier is non-admitted does not mean that it is not regulated. Non-admitted carriers still have to follow insurance laws in the states in which they do business; most just intentionally do not file rates because they want to retain the flexibility they need for the types of risks they write. 

Admitted and non-admitted insurance carriers both have their place in the market. Much more important than the admitted status of a company is its financial strength. Non-admitted carriers often operate throughout the nation and even in other countries, and many of them are multi-million or billion-dollar companies. The state of Florida only requires a new admitted property insurer to show assets of $5 million. It is common for an admitted insurer, especially a smaller, newer one, to be far less financially stable than most non-admitted companies.

As always, your best course of action is to discuss your options in detail with your agent. She can provide detailed financial information for various companies, and advise you of the most appropriate policy for your individual risk.

Tuesday, April 26, 2016

Insurance Considerations for Investment Homes

A Dwelling policy is the ideal home insurance policy for rental homes in Florida. Tenant occupancy will probably void your Homeowners policy, so it is crucial to ask your agent to switch your Homeowners policy to a Dwelling policy, preferably before the lease begins.

Sometimes referred to as “landlord insurance” or “rental property insurance”, a Dwelling policy covers the building, just like a Homeowners policy does, but there are some differences:

Personal Property/Contents coverage is not automatically included on a Dwelling policy, but can be added. It is a good idea to add enough contents coverage for your appliances and carpeting, and more coverage if you have additional items in the home.

Fair Rental Value coverage compensates you for lost rental income due to a covered loss. For example, if your rental property is damaged in a fire, and you aren't able to rent it out for 3 months while it's being repaired, your policy will pay the lost rental income.

Loss of Use coverage provides funds for your existing tenants to rent another place while your damaged home is being repaired. 

There are three Dwelling policy forms: the DP1, DP2 and DP3. The DP1 and DP2 contain serious coverage deficiencies, and should be avoided. The DP3 is the best Dwelling policy to cover your investment.

As a landlord, you should also consider requiring your tenant to carry a Renters policy (HO4). Renters insurance covers the tenant's personal belongings, loss of use and the tenant's liability. These coverages provide an extra layer of protection, and may keep you from having to file a claim on your own policy.

Please let us know if you have additional questions on the best ways to protect your investment properties! 

Thursday, January 14, 2016

Upgrades, Inflation and your Homeowners Policy

When you request a quote for Homeowners Insurance, the agent begins by calculating the current replacement value of the home. This calculation includes the current cost of materials, labor, contractor overhead and debris removal. As time passes and/or you make changes to your home, the replacement value should be recalculated, and your coverage adjusted accordingly.

You should inform your agent if you make any of the following changes:
  • Add a pool, porch, screen enclosure, deck or any other attachment
  • Add a garage (attached or detached)
  • Add a room or home extension
  • Upgrade your kitchen or bathrooms. (A renovation that uses similar materials - replacing old tile with new tile, for example, will not change the replacement value of your home. If you upgrade the quality of the materials used - replacing laminate with granite, for example, this will change the replacement value of the home.)
Even if you don't make any changes to your home, the replacement value should be recalculated every few years or so. Some policies have a built-in Inflation Guard, which increases your coverage by 4% every year, but this is not always adequate. Your agent can recalculate the replacement value of your home any time that you ask.

As we've discussed before, the importance insuring your home for its full replacement value cannot be emphasized enough. At the time of a loss, (even a partial loss!), you may be penalized or have your claim denied outright if you don't carry enough coverage. Ask your agent, or contact us with any questions.

Monday, December 14, 2015

Under-insuring Your Home: Understanding the Dangers

If your home is under-insured (not insured for its full replacement value) at the time of a claim, you may be subject to a reduction in your claim payout or denial of your claim. If you have a mortgage, this may leave you with a damaged or unlivable home that you still have to make mortgage payments on. Being properly insured is serious business.

Legally, your home should be insured for its full replacement value. This is the amount that it would cost to rebuild your home today, including labor, materials, contractor overhead and debris removal. The replacement value of your home is distinctly different from the market value (what the home could sell for) or the actual cash value (replacement value minus depreciation).  

As Floridians, we're all keenly aware that we haven't had a major hurricane since 2004. New insurance companies and new insurance agencies have been steadily entering the market since then, and competition is fierce. Though most insurance agents are knowledgeable and ethical, we have seen an epidemic of homes being insured well below the replacement value. It's essential for you to know this: Even if your agent recommends under-insuring your home, you will still be penalized in case of a loss

To protect yourself, always ask your agent to provide a copy of the Replacement Cost Estimator, showing how he calculated the replacement value of your home. If there are errors (wrong square footage, incorrect construction type) or omissions (bathrooms, porches, pools, garages not listed), ask questions and consider talking to another agent.

Insurance is something we need but hope never to use. Is a $200 per year savings in premium worth it if your policy won't pay out when you need it?

Monday, October 12, 2015

Flood Insurance, FEMA or Private?

Flood Insurance has gotten a lot of recent press, with FEMA increasing rates for its National Flood Insurance Program (NFIP). For many years, the NFIP was the only source for Flood Insurance, but now that subsidies and inadequate rates have put the NFIP $24 billion in debt, the industry is starting to look elsewhere for Flood coverage options.

Enter Private Flood. Private options for flood coverage are becoming available in a couple of formats:

1) Homeowners Endorsement: Some home insurers, such as American Strategic Insurance and Homeowners Choice now have flood coverage available as an endorsement  (add-on) to your home policy. When available, the rate is generally lower than an NFIP policy for the same coverage.

2) Stand-Alone Private Flood: These are flood insurance policies underwritten directly by insurers, not by FEMA. Companies such as Lloyd's of London, Lexington, Advanced, Ace, Gridiron and Western World offer flood insurance, and many others, such as Bankers Insurance Group are in preliminary discussions.  

At this time, private flood carriers are choosing their risks carefully, so not every home will qualify. When available, though, premiums tend to be lower than the NFIP, sometimes much lower. In addition, private flood policies often include coverages not available under the NFIP:

  • Replacement Cost on Contents: With an NFIP policy, you only receive the actual cash (depreciated) value for your flood-damaged contents.
  • Replacement Cost for the Building on Secondary & Investment Homes: The NFIP only insures the home for replacement cost if it's your primary residence.
  • Additional Living Expenses: This provides money for you to stay elsewhere if your flood-damaged home is uninhabitable.
  • Higher Coverage Limits 
  • No Non-Primary Residence Surcharge: In addition to the other fees charged by the NFIP, there is a $250 surcharge per year for non-primary residences. (As noted above, these homes are also insured by the NFIP at actual cash value). Private flood policies have no such surcharge.
Call us at 321-259-2228 to ask about private flood insurance for your home. Remember, where it rains, it can flood.