Over the next few months there are expected to be major changes in the property insurance market in Florida. Homeowners insurance rates are expected to increase due to higher than expected losses and the inability to keep rate increases on pace with those losses. For the average homeowner in Florida, these rate increases are going to be most unwelcome for a property market that already has the highest average property insurance rates in the entire country.
Another problem will be a real estate market that is still red hot with historic low interest rates and a lack of supply creating a large demand. One temptation of buyers and lenders trying to qualify for financing will be to try and keep the insurance costs as low as possible. The following are just some of issues I see when the desire for cheap premium outweighs the need for proper and adequate insurance coverage:
- Underinsured dwelling - This is the second most common problem I see with insurance proposals. Since real estate in North Florida is so affordable the cost to buy a home is usually less than the cost to rebuild that home in the event of a catastrophic loss. This is an uncommon problem in other coastal areas around the country.
- Underinsured contents - This is more an area of conern for our industry because the insurance agent is usually the one lowering the contents coverage to make the premium more attractive. The problem of course is that when there is a large loss there is not enough money to pay for the belongings of that individual.
- Actual Cash Value instead of Replacement Cost - While the home is almost always insured for replacement cost, the contents are not covered by replacement cost unless specifically endorsed. In my opinion, unless the insured is certain they do not want replacement cost, every policy should include replacement cost for contents (even though it is slightly more expensive)
- Important coverage is excluded - Typically I see things like sinkhole coverage and animal liability excluded but much more troubling is when I see law and ordinance, water coverage, and even roof damage exclusions. These policies while providing some coverage do not meet the standard of what insurance is supposed to do even if the lender is okay with it.
If you are considering your homeowners insurance options, let us show you how to avoid being ripped off by a cheap policy that won't protect you.