Florida Homeowners' rates are going up, but why?
Homeowners' insurance rates in Florida have been on the rise due to several factors specific to the state.
Geographic location and weather: Florida is prone to natural disasters such as hurricanes, tropical storms, and flooding. The state's coastal areas are particularly vulnerable. The increased risk of property damage and higher claim payouts resulting from these events contribute to higher insurance premiums.
High-value homes: Florida has a significant number of high-value homes, which can lead to higher insurance costs. Insuring expensive properties comes with a greater financial risk for insurers, as the potential claims payouts are higher in the event of damage.
Building codes: Florida has implemented stringent building codes to withstand hurricane-force winds and minimize property damage. While these measures are essential for safety, the initial construction and ongoing maintenance costs of meeting these requirements can increase insurance premiums.
Litigation environment: Florida has experienced a rise in insurance litigation, particularly related to property claims. This trend has led to increased costs for insurers, including legal expenses and higher settlement amounts. Some fraudulent or excessive claims have also affected insurance rates.
Reinsurance costs: Insurance companies often purchase reinsurance to spread their risk and cover catastrophic events. The cost of reinsurance can impact homeowners insurance rates, especially in high-risk areas like Florida.
Market competition: The availability and competitiveness of insurance companies in a particular market can affect premiums. In Florida, some insurers have reduced their coverage or left the market altogether, leading to a concentration of insurers and potentially higher prices.
Strong legislation was passed last year to end some of the loopholes that have plagued Florida Insurers for many years. These changes will start to be felt in about 12-18 months since it takes time for the effects to be felt. Stay tuned to the next article which will speak more about these changes.
