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Times are changing and rates are going up. With the rise of claims, increased litigation expenses, and hectic hurricane seasons the last few years we’ve witnessed several carriers reducing their exposure by pulling out of high-risk areas such as Fort Lauderdale, Oakland Park, and Wilton Manors. The same carriers also revealed premium increases on the policies they are keeping.
Unfortunately, insurance rates have increased dramatically, in some cases 30 to 40%, with no immediate relief in sight. What does this mean to a South Florida homeowner? Higher insurance costs and a shrinking list of competitors to choose from. Many agents find themselves left with Citizens, the state backed insurance program, and the insurance considered last resort. Even the few standard carriers writing new policies in this area are limiting their business to newer homes and roofs. This is leaving few options for the homeowners of the older East homes. Finding reasonably priced insurance with adequate coverage is one of the more challenging obstacles for today’s homeowner. What can homeowners do to mitigate this ever-increasing cost?
Have your home inspected
Whether you currently own or are buying a single-family home or condominium, make sure to have a four-point and wind mitigation inspection performed.
The cost for these inspections is typical $150-$200 for both, and the discounts you can receive may be ample.
There are even significant discounts available based on the way your roof was built. Still, a full inspection must be provided to the carrier. A four-point inspection must be no more than one year old, and a wind mitigation inspection must be less than five years old. If you live in a condominium, your association may have a wind mitigation inspection for your building available. The credit for a concrete roof for a condominium is typically substantial. Once you have these inspections done, make sure that your agent and carrier has rated your policy correctly. Many homeowners overpaid through the years because they were rated with their roof to wall connection as toenails or clips when they actually have single wraps (which offers a much more generous discount).
Upgrade and protect your home
Now more than ever, carriers are requiring older East homes to be updated. Newer roofs open you up to more carriers and provide you an FBC roof credit, a well-maintained roof will help you avoid being now-renewed. Update those kitchens and bathrooms. Carriers have been inundated the last few years with water claims.
Having newer plumbing and water heaters reduces a carrier’s risk. While the upfront cost may be substantial, having hurricane windows or shutters provides you with a very significant discount on your windstorm insurance. This also has an added bonus of an increase in the value of your home. All openings to include windows, doors, and garage doors, must be done to receive the full discount. Are you one door away from having full opening protection? It may be cost-effective to have that one door replaced to receive this discount. Finally, if you have had your roof replaced or hurricane shutters or windows installed recently, have an updated inspection performed. Be sure to make your carrier aware of these improvements. They do not automatically provide the homeowner these credits. A new inspection must be submitted.
Speak to your agent about your limits and deductibles
There is a big difference between your home’s market value (what you can sell your home for) versus replacement cost (what it would cost to rebuild your home in the event of a total loss).
The latter is what insurance carriers base your limits of insurance on. They also do not insure your land, which is a significant portion of your home’s value. Replacement cost is calculated based on your square footage, type of build, pools, condition, and home upgrades. Many carriers will raise your dwelling limit yearly to compensate for inflation, increasing your premium. In some instances, your dwelling amount may be reduced if your agent can show the carrier that the replacement cost of your home is less than your current limits.
Other considerations may be to increase your “all other perils” deductible from $1,000 to $2,500 and your wind deductible from 2% to 5%. Typically, these deductibles are the maximum a mortgage company will allow. While increasing your deductibles will likely lower your insurance premium, keep in mind that you as the homeowner are taking on a greater financial responsibility in the event of a loss.
A few other things to keep in mind...
Insurance rates are also based on the homeowner’s credit and claim history. Insurance scores, which encompass these factors, are always run when binding a new policy. They are also periodically run upon renewal. Bankruptcies and foreclosures will exclude you from individual insurance carriers and raise your premium with others. If one homeowner has better credit than the other, it may be wise for this person to be the primary insured. Furthermore, do not let a policy lapse. Even if you are shopping for another carrier, make sure you keep your insurance current. Many carriers will not write a new homeowner’s policy if you have let your previous policy lapse. Also, many carriers will use the opportunity of a lapse to cancel the policy with no hope of reinstatement. Finally, be cautious when making claims because it will be on your “insurance record” for five years. While a carrier cannot cancel you while you are amid a claim, they can non-renew you at the end of your term, leaving you with no other option than Citizens. We have homeowners insurance to utilize it when and if we need it, but it is not meant to be a maintenance policy. Make claims wisely.
A homeowner can have excellent credit and never have made a claim, and still see their premium increase every year.
Unfortunately, we are all still paying for the devastation of hurricane Irma and Michael and the claims of others. Frankly speaking, living in paradise can be costly. Still, there are actions and measures that you as a homeowner can take to lower your insurance costs!