Introduction
According to a Florida Tax Watch report today, Florida’s average annual premium nearly triples the national average and those rates are even higher here in South Florida. Even with all the upgrades, his annual premium is north of 10 grand. I know a lot of people have seen their premiums go up more.
This includes a nearby neighbor who told me away from our camera her annual premium is more than $20,000. A recent study showed 15 to 20 percent of Floridians choose to drop their insurance. It’s getting where people are going to have to not have insurance or have to move.
It seems few things are stressing out homeowners worse than the Florida housing insurance crisis. On our view of multiple sources, you’re paying anywhere from $8,500 per year on average to as high as $10,500 depending on the dwelling you have, depending on the location of Florida that you find yourself in. Now, this is compared to just $2,000 a year back in 2018.
Rising Costs: The Hidden Expenses of Homeownership
So, let’s say your property is around $750,000 in value. You’re paying around $850 a month for your hazard insurance. Your taxes are going to be probably somewhere around $750 a month.
And if your community has an HOA, you’re paying $1,500 to $1,700 a month before any mortgages, any maintenance on the property, any utilities. And we know on top of all that, the cost of food and auto insurance and everything else is not slowing down. It’s still high.
It’s still escalated. And while the pace of price growth of nearly everything we have to pay for day-to-day seems to be slowing in how fast it’s growing, but it surely hasn’t rolled back any. When you take in consideration just how many people are on fixed income who cannot handle these escalating costs, the outcome of this can be very frustrating at the least and devastating at worst and beyond that, consider homebuyers. It’s little wonder why just two months ago, we saw a record number of contracts canceled. People going to purchase a home, putting it under contract across Florida and bailing out as soon as they figure out all the hidden costs that come with buying a home here.
While I know the lenders and the realtors that you follow on social media are super excited because the mortgage rates for the 30-year fixed has fallen one to one and a quarter percent. Unfortunately here as we end 2024, many would-be buyers could just care less because they simply cannot afford the ticket to ride. Now, I’ve done a few exhaustive videos on exactly how we got in this mess, but without going completely down memory lane, the chief causes were rising home repair costs.
Diminishing Housing Insurance Coverage Options
Since 2020, home costs to replace anything after disaster went up 55%. Obviously, we had supply chain disruption and crazy inflation that took place for the past three or four years. But on top of all that, Florida uniquely had what was called AOB or assignment of benefits fraud, where contractors would bilk the insurance companies and not do repairs.
Add to that, Florida had some of the most lax litigation laws and ultimately, Florida accounted for 80% of property insurance litigation expense. Now, as a result between 2021 and 2023, at least a dozen companies either went insolvent out of business or just stopped writing policies here and left the state due to financial instability. Now, a dozen might not sound like a lot, but when you only have 36, 37, 40 companies to write from, that is significant.
Now, as a reminder, we’re now in this economy where people are coming to Florida in droves and that hasn’t really changed a ton, but this happened to be one of the hottest purchasing environments we’ve ever seen. And people are looking to buy here and they can’t get insurance. So what happens next with diminished options in the market? Citizens Insurance, which is a state backed insurer of last resort, their policy load, which they’re not supposed to be taking on policies and competing with the public market, but because there was an absence of any other option, their volume exploded and they ended up taking on now 1.4 million policies.
Rising Premiums and Unpaid Claims Threaten Homeowners
Now, this led to the now infamous press conference where Ron DeSantis said that Citizens Insurance, if we saw a significant disaster was on the verge of collapse, they were on the verge of insolvency and caving in. It is not solvent and we can’t have millions of people on that because if a storm hits, it’s going to cause problems for the state. There’s a general inflation that is impacting this.
It’s much more expensive to do a roof today than it was four or five years ago. That’s just And essentially what he was saying is they were not self-sufficient to the degree that they could handle losses. And then ultimately if something really bad happened, a lot of our neighbors and whatever area got hit with a storm would ultimately get picked up by taxpayer expense and my friends, as we fast forward to today, we are not out of the woods and there’s some very sketchy things going on that you need to be careful of, or you could get your fingers slammed in the door and let me start with some very popular brand insurances like Allstate and State Farm.
In my estimation, you need to be very careful if the company you’re with is asking for a big increase in premium this year in 2024, as we’re on the back end of what should be the cooling of all these expense issues. Take Castle Key Indemnity for instance, and Amica Mutual Insurance. Both of them are asking for 53.5% and 54% increase respectively due to their cost of business and weather impact.
At the same time, here’s an interesting story about Allstate and State Farm where national news agencies are calling them out for not paying claims at an alarming rate across Florida. You say, well, Jared, you didn’t mention Allstate before. Well, Allstate owns Castle Key Indemnity.
Florida's Insurance Giants Are Failing to Pay Claims
Check this out. Floridians filing a homeowner’s insurance claim had the lowest chance in 50 states of getting a check from their insurance company. Now listen to this. It says last year, those who filed claims with two of the state’s largest, healthiest companies, subsidiaries of State Farm and Allstate had the lowest chance of all. The article goes on further to say Castle Key Indemnity Company, a subsidiary of Allstate, last year closed 47% of its claims without making a payment, making it the highest rate in the state. The article goes on and says among the 40 companies in Florida last year, half, half did not pay on at least 30% of claims.
Now listen to this, and this is a recent article. It goes on to say these two companies, which is Allstate and State Farm have been historically at the top of the pack in the last few years. In 21, in 2022, State Farm closed. It means it just shut down more than half of its claims without making a payment. Two years ago, so did Castle Key companies. And again, Castle Key, we know on record has asked the department of insurance in Florida, Hey, please let us bump our rates by 53, 54% as they are at the top of the pile in Florida.
Not paying out when you call them because your house flooded. Now, listen, if this article and the research it contains is a correlate, this tells us that when a company is largely undercapitalized in the insurance business, they’re not going to pay your claim. So what I would recommend you do is check who your coverage is with and see and search the news to see if there’s been any announcement that they’ve solicited department of insurance in 2023 or 2024 and they’re asking for rate increases. And by the way, you might be thinking, Jared, isn’t everybody asking for rate increases? This is insurance we’re talking about. No, there’s been an actual wave of an increase of actual notices going out that policies are actually falling this year, which is why this is a glaring story and again, before we rant completely on public companies and say, ah, the public greedy companies are the devil, with insurance. It’s hard to argue with that. Things are still sketchy for government backed policies as well.
FEMA Flood Insurance: What Homeowners Must Know
A story just came out that a family paying for flood coverage through FEMA’s national flood insurance program. They’re paying nearly $9,000 a year for premiums for flood policy, which is that’s how you get many of them. Now, I think there are private coverage for flood, but a lot of people go through the government through FEMA, which is a huge national program for which you can buy flood.
These people had their house hit with a flood from the recent storm. It just came through tropical storm Debbie. You’ll remember and then ultimately got denied for probably 70, 80,000 in damage. Why? Because according to FEMA, the former owner had a claim and somehow, I don’t even know how they know this, but they said certain things were not fixed after the former claim, which was paid out apparently to someone who doesn’t even live in the house. And now in apparent current flood, they’re left out.
It makes me wonder if they refunded the owner, their premium back. It’s like, Oh, you’ve been paying us eight or nine grand for something we would never give you anyways, by the way, I’m going to link this article down below, because if you have flood insurance through FEMA, the bottom of the article points out that you as the owner can request some claim history. So you can do a bit of research to make sure that if you get caught, that they won’t deny you for the same reason these poor folks got denied.
So heed the warning. Now, another huge risk that people are facing right now across Florida is when they finally have a disaster on their home, they call the insurance and the insurance company doesn’t pay anywhere near today’s value for the things that need repair. The insurance information Institute did a study showing replacement costs gradually went up 55% between 2020 and 2022
Major Risks Ahead for Underinsured Homeowners with Citizens Insurance
The lesson here, homeowners are underinsured and aren’t upgrading their policies with inflation in mind. And if you have not upgraded your policy in recent years, you’re going to have a big gap. It’s why he says you should double check the full replacement cost for your home and make sure what’s in your policy is enough.
Now you’ll remember early in the video, I mentioned how citizens policies have ballooned to 1.4 million. If you’re a current citizens insurance holder, you have to listen up because there’s some big changes coming. Citizens is depopulating, which means they have a goal in the near term to shed almost 400,000 policies and there’s going to be some major risks to you. If you’re on citizens right now. So look at the headline from the story last month, Florida’s biggest insurer says it needs to increase rates by 93%.
The story goes on to quote Tim Saria, who is the CEO of our state backed insurer of last resort citizens insurance. He said rates are actuarially unsound and are competing with the private market. The markets rates are way up here and citizens are way down here.
It’s basically a form of subsidized insurance. Now I think most of you get at face value what the CEO just said. He’s saying that the market cost of what citizens is providing, they’re not charging enough for what you’re getting and essentially another storm comes through here in hurricane season and we have to dig deep in our state insured pockets to start paying out those claims and it’s going to trickle over into taxpayer money to cover the cost and the other thing too, is if they’re going to try and depopulate, you means they’re going to take you from that insurance.
That’s half what it actually costs in the market. There’s going to be massive sticker shock when they finally move you off of it but if you’re one of the lucky ones to stay with insurance for a while, this cheaper rate, no, this, they can only increase your rate by state law by no more than 14%. And guess how much they’ve announced that they’re going to increase your rates. If you’re with citizens, ding, ding, ding 14%.
Check Your Coverage When Switched From Citizens Insurance
Now there’s a second major thing that you need to know about if you’re on insurance and you get that letter that one day pops in the mail this fall and says, surprise, you’re going to Seminole insurance. I just made that up. Optimist insurance. Seminoles aren’t doing that great. Your insurance would probably be really expensive. But my point is the day comes you get bumped into the public marketplace for insurance.
You need to understand that what you’re getting offered might not be what you had at citizens and you need to watch because you might assume, okay, the state backed insurer just swapped me a letter and I’m going over here. It may not be the same. Check the details.
Have your agent walk through them with you. Mark Friedlander with the insurance information Institute says if you’re currently on citizens, that’s extremely important as it removes policies, 132,445 to be exact. You should check that takeout offer carefully. Some policies are now being written with depreciation factored into portions of the dwelling coverage. It’s called actual cash value. He says normally that’s what personal belongings are written as property is typically written as replacement cost value, which means if you lost your roof or your garage door, it would be replaced at what it’s worth today.
Some Florida insurers are writing policies with the depreciation for your roof. So say your roof is five years old, you’re not going to get the full value for that. So once again, you get kicked off of citizens, double check with your agent, make sure you’re not getting scammed. It’s not that you would be intentionally scammed. It’s just surprise. You have way less coverage than what you might need.
Florida's Insurance Market Shows Signs of Improvement
Now I get it. Jared, this is all serious. I thought you said they passed laws in 2022. I thought they fixed the problem. Where is the light and where is the tunnel and where are we at through this whole chaos? Well, there is some improvements. There are some signs of things shaping up that say going into 2026, we might be much better off than we are now. This year, eight new companies entered the market, nine companies filed for rate decreases and 10 requested to stay the same. First off, we went from shedding a big number of our 40 insurance companies. We lost 12.
So we had a much smaller marketplace, much less competition, and ultimately prices are extraordinarily high. Well, in 2024, eight new companies announced that they’re going to be doing business in Florida. On top of that, nine of our existing companies are doing business in Florida, announced rate reductions and as a word of caution, I will say that if you’re going to shop around and you should, make sure you talk to your agent about who these companies are and how well capitalized they are. And if they’re going to be there for you, if you have a claim, there can be pitfalls in coverage that I outlined. There’s different ways that they compute things.
There’s different ways that they depreciate things. And ultimately you could be in for a surprise if you don’t know exactly what you’re getting. Now, if you’re looking to buy in Florida, once you know the area that you’re actually looking to move into, one thing that I would strongly advise you to do is take one of those available properties off of Zillow, wherever you’re shopping and have your insurance agent give you an estimate for the insurance for that house. That’s right. You might be buying in an area like, for instance, if you’re going into North Orlando, those are older homes.
The insurance on a house that’s dated is going to be much higher and honestly, I’m not sure exactly how accurate the first initial estimate will be because most of these insurance companies want to see inspections and they want to get through the attic and they want to see the plumbing agent. There’s a lot of details that they will want, but at least you should get some ballpark upfront because insurance could absolutely crush what you can qualify for. As I said earlier, a $10,000 a year policy consumes what you qualify for by $833 a month.
That takes away $150,000 less in mortgaged amount just to cover that insurance bill. So if your financials are tight, if what you qualify for is on a line and what you, you might say, I qualify for 800, but if I can’t buy eight, I mean the stuff at 650 is not interesting to me. You might find that the insurance alone will change the perspective and it has for many buyers and that’s obviously why Florida is suffering with a lot more unsold inventory than anywhere else in the country. Our inventory is just really high and insurance is playing a part and if you’ve watched this far, do me a favor, smash the thumbs up, drop down the comments, say hello.
Let me know what your insurance looks like and tell me what part of the country you’re viewing from and mean a lot to me.
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