The Florida home insurance crisis is real and this is how you navigate through it.

To many Florida homeowners, insurance has become a four-letter word. You can’t live with it and you can’t live without it. Moreover, wind and flood insurance premium shock has been a deal breaker for more than one prospective home buyer in the current real estate market. Whether you’re buying or selling a home in the Sunshine State, you’ll be well-served to read on. 

2022 was the perfect storm, of sorts, for Florida insurance. Just as the Florida Legislature was tasked with reforming the insurance industry, the industry got sucker-punched by Ian, a devastating Category 5 hurricane striking Florida’s southern Gulf Coast. Many are still reeling from the impacts. As with any major storm hitting Florida, another insurance industry shake up was inevitable. The dust is just beginning to settle and here’s what we found.

Our Favorite Florida Insurance Quotes

Our RE/MAX Alliance Group’s in-house insurance affiliate, We Insure, (visit www.weinsuregroup.com) hosted an insurance workshop that brought us up to speed on exactly what’s happening in the Florida homeowners insurance market, the companies writing policies and what you can expect for the next year in Florida insurance. They had some very helpful tips for finding good coverage at the very best rate:

1. Find and work with an independent insurance agent before you begin home shopping. Aside from tips and insights, you will already have rapport with an independent agent who will shop the market rather than quote you on a single carrier. 
2. When you write an offer, make sure you’re using the “Right To Inspect” contract. Dismiss anyone telling you not to include an inspection contingency. (In today’s insurance market, those days are over.) 
3. When you get an accepted offer, schedule inspections immediately, including the Wind Mitigation (Wind Mit) and Four Point inspection. 

The Wind Mit is an assessment of the home’s design and its overall resilience to windstorms. Newer homes incorporate more resilient design features and some mitigation credits are automatic for homes built in 2002 or later. But don’t fret, older homes can be retrofit with some of the same mitigation features. Your inspector will tell you if a particular home has them.

As the name suggests, the Four Point covers four main components of the home: Structure, electrical, plumbing and HVAC. These are all critical to the integrity of the home and its overall insurability. Because inspectors operate differently and these inspections may be add-ons to the fee, find out if the seller has existing inspection reports (and a survey too, while you’re at it). Provided nothing has been modified or improved, it is good to go. An existing Four Point is only good for 12 months from date of issue. The survey may save you some coin if you’re applying for a mortgage. 

4. Regardless of whether or not the property is in a flood zone, ask the seller if there is a National Flood Insurance Program (NFIP) policy in place. If there is one, have it transferred! It only requires you to fill out a transfer form. Don’t drop it to save a few hundred bucks. 

Why? Multiple reasons.

Flood insurance in Florida used to be optional in most cases - depending on a variety of factors, including but not limited to the carrier’s whims and mortgage requirements. The new trend is heading towards “no wind coverage without flood insurance.” This isn’t absolute, but it’s heading that way. Citizen’s, a carrier many are well familiar with, is leading the way with this requirement. 

With the Florida insurance industry in a state of flux, the NFIP is a grandfathered program that can be passed down from owner to owner for a covered property, but disappears like an ice cube in the Florida sun when allowed to lapse. 

Before you decide to let the NFIP coverage lapse, consider this: You drop the coverage and opt for a bundle rate or lower premium elsewhere. Then say, that carrier goes out of business or decides to drop you (both very possible). There is no going back to NFIP. You’re boxed out. 

5. Did you know that insurance companies, just like banks, pull a credit report on you that also includes claims history? They want to rate the risks associated with an insured and price or deny coverage accordingly. This also includes any home you may consider purchasing. It’s kind of like a “Car Fax” for homes that reveals its damage history, repairs and permits pulled. The takeaway for Sellers is to disclose everything, or it may come back to haunt you. Buyers should thoroughly question sellers on any known damage claims and repairs, being overly cautious about unlicensed contractors and un-permitted repairs. 

Florida Insurance Tort Reform? 

It may come as a surprise, then again, it may be no surprise that Florida leads the league with 80% of the nation’s insurance litigation. The “he said, she said” conundrum of ‘was it a wind event or was it a water event?’, plus all the other technicalities of insurance claim settlement made Florida a goldmine for the legal industry. 

That was another sore spot the Florida Legislature was tasked to address. Governor Ron DeSantis signed HB 837 into law on March 31, 2023. The bill has sweeping impacts on everyone and everything involved in Florida insurance, including limiting attorney’s fees and making it harder to bring bad faith claims against insurers. The changes are too numerous to discuss here, but a comprehensive blog on the topic is found here. 

Another key piece of legislation, Senate Bill 4-3 addressing what many viewed as insurance companies “cherry picking” lower risk properties, prevents insurance companies from rejecting roof coverage on any roof showing five years of service life or more (as determined by a licensed roofer or inspector). 

Undeterred, some of the insurance companies fought back with a policy of excluding homes over 10 years old. We’ll just have to wait for the Florida Legislature to catch up on that one. But until then, be on the lookout for carriers with that exclusion. And for the record, 10 years is somewhat arbitrary, as construction design for 10 year old homes is extremely robust. 

While there is more legislative work to be done for sure, the welcome news is that something has been done and things will continue to be done to restore stability, profitability and affordability in the Florida homeowners insurance market. The underlying goal is to encourage former and new insurance companies back into the Florida insurance market. A win-win for sure.

Citizens Property Insurance Corporation: When to call on “the insurer of last resort.”

By Wikipedia’s definition, Citizens Property Insurance Corporation was created in 2002 from the merger of two other entities to provide both windstorm coverage and general property insurance for home-owners who could not obtain insurance elsewhere.

Mistakenly perceived as the ‘magic bullet’ for Florida homeowners insurance, Citizens became the state sponsored answer to the uninsurable masses. While Citizens has helped a multitude of homeowners get the coverage they needed at below market rates, it’s far from solving all of Florida’s insurance woes. Here’s what you need to know. 

• Citizens is only available to you if you cannot find a carrier willing to cover your home, or the market rates are all 20% higher than the Citizens rate quote. (Remember, the independent agent will shop the market for you and let you know if Citizens is your only option.) 

• Citizens does not cover everything, such as car ports, porches, lanais and certain types of theft and liability, in which case a supplemental or umbrella policy may be an option.

• Lastly, Citizens is not funded, nor is it capable of paying out claims for every insured property. The claims piggy bank is limited and in the event losses exceed available funds, an assessment would have to be made against all Citizens policy holders to make up the difference. 

The Florida homeowners insurance industry will always have its share of aches and pains. With legislation, both upcoming and enacted, there is reason to believe the industry will return to a healthier, more competitive environment.

UPDATE AT PRESS TIME:
Tailrow Insurance Company just became the first new carrier approved by Florida’s Office of Insurance Regulation (OIR) since the signing of HB 837 in March. This is welcome news and evidence that the legislation is getting some traction and improving the business climate for Florida Homeowners Insurance. Stay tuned for further updates.

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