Florida homeowner’s insurance is one of our favorite cocktail party conversations here on the coast. People who don’t live on the coast think we’re nuts to risk all just for great views and beach access. But we’re not the only homeowners who are being charged more for getting less coverage; it’s the new norm.
If you notice a drone over your roof, don’t be surprised, insurance companies are checking roofs for condition before renewing homeowner’s policies. In an effort to recoup some of their losses in recent years, insurance companies are raising deductibles, requiring new roofs and denying coverage on older homes without strong wind mitigation. With the Gulf waters overheated, we can expect more storms and higher premiums.
The national average for home insurance has gone up 20% from 2022, according to Bankrate.com. As unbelievable as it may seem, 12% of homeowners in the country don’t purchase homeowner’s insurance. About half of them have annual household incomes of less than $40,000, according to a survey by the Insurance Information Institute.
Florida is not alone in experiencing double-digit insurance increases. Companies are raising rates or completely leaving Louisiana and California in addition to Florida. There is, however, a solution for some homeowners who have the funds and nerve.
The insurance industry has a phrase for homeowners who choose not to buy homeowners insurance – it’s called “going bare.” If you own a home with a mortgage, you can stop reading right now, you don’t have the option of going bare since your mortgage lender will require you to carry sufficient coverage to repair or replace your property in the event of a major disaster.
Your lender may also require you to escrow for insurance as part of your monthly payment and then they pay the annual premium. This is, of course, to ensure that the premium is paid and their asset – your home – is insured. If this is an arrangement you have with your lender, it’s possible to ask them to allow you to pay your insurance without having to escrow for it monthly. Usually, you have to have owned your home for several years and have demonstrated a good credit score and your ability to pay your mortgage payment consistently on time.
However, if you’re a gambler, you can “self-insure,” assuming your bottom-line savings will outweigh any repairs you might have to undertake in the event of a storm or fire. Wealthy people say they have enough money saved to rebuild or move even if their house is destroyed, but for the average homeowner, it’s a bit more of a challenge.
A standard insurance policy typically covers the cost of replacement of the home and some of its contents in the event of damage or theft. Some average homeowners who have satisfied their mortgage choose to drop their insurance and bank the annual premium. Sometimes they come out ahead, especially if they have the ability to invest the money not paid for premiums at a good return, but it’s a risk not everyone can or should take. In addition, some homeowners who live in vulnerable waterfront locations are pushed into going bare when their policies are dropped and/or are renewed at a very high rate.
The increased cost of homeowner’s policies is hitting the real estate market heavily. Potential buyers can’t afford the double whammy of higher interest rates and higher insurance premiums, freezing the real estate market further. Pay the price or go bare – no good options.