Why is homeowner’s insurance so high? Local agency owner explains what you can and cannot control
Sherry Collier, agency owner of Brightway Insurance in North Fort Myers, is frequently asked: Why is my homeowner’s insurance so high?
There are factors people can control and those they cannot to keep those rates down, she said.
“Once upon a time, homeowners insurance for a typical home was around $500. Then along came Hurricane Andrew that forever changed homeowner’s insurance in Florida, and then came the infamous hurricanes in 2004-2005. Hurricane Charley’s damages amounted to $13 billion just in Florida alone.”
The most common response from customers is, “But we have not had any hurricanes hit the state since that time.”
In order for insurance companies to sell homeowners insurance in Florida, the state insurance regulation requires them to have a minimum amount of money above and beyond their expenses to pay claims, she said.
“However, it is impossible for them to have enough money in surplus to pay all the claims in the event of a major catastrophe. So, they are also required to buy reinsurance.”
Insurance companies even have to buy insurance.
“Reinsurance is insurance policies the insurance companies buy as protection against catastrophic losses. These reinsurance companies are spread all over the world. Just like your investment portfolio is diversified, the insurance companies diversify their risk by buying reinsurance from usually at least 10 different companies, and they are required to only buy from highly rated, financially stable companies.”
Another factor is Risk Management Solutions.
“It is a software program that basically predicts hurricane damages. The new version of RMS has now calculated that the hurricane risk to Florida’s inland counties has been grossly underestimated and conversely, that the risk in some coastal areas may have been overestimated,” she said.
Another factor that has affected insurance rate hikes in Florida is sinkhole claims.
“Sinkhole claims have tripled from 2006 to 2010. Most of the claims involve cracks, not a catastrophic collapse. The majority of claims come from Hillsborough, Pasco and Hernando counties, however, it still affects the insurance rates in our counties,” she said.
On a smaller scale, dog bite claims in Florida last year cost one insurance company $5.6 million.
“Just another factor that removes money out of the ‘pot’ so there is less to pay the hurricane claims,” she said.
What you can control
Live in can affect your insurance rates. A 2002 or newer masonry home with a hip roof has the best rates. It meets the new hurricane construction standards, the hip roof design deflects more wind than a gable roof and the masonry construction will not burn as quickly as a frame home.
However, if you live in the “wind pool,” or areas that are at a higher risk for wind damage, or if you live in an area where your home is more than 1,000 feet from a fire hydrant or more than five miles from a fire station, your rate will be higher, Collier said.
“Also, if you live in an area where there are a lot of vacant homes, your rates may be higher as well. Vacant homes are a target for thieves and vandalism,” she said.
Claims’ costs can be higher since there is no one there in case of a water leak, fire and such. Lee County has about a 30 percent vacancy rate, with Collier County even higher at 32 percent, according to recent statistics.
If you have a mortgage or line of credit on your home, you will also be required to purchase flood insurance if you live in a flood zone.
But what if you already own your home and you cannot relocate?
Collier suggested the following:
? If you have a home that is older than 2002 you can have a wind mitigation inspection completed that may bring you discounts. The wind mitigation inspector will conduct an inspection of your home and answer the questions on the form, such as the roof to wall connection and the age of the roof.
Depending on the answers each insurance company offers discounts for each category. This is not available for mobile homes.
? Raise your deductibles. Discuss this with your current agent to see if this is advantageous.
“Also, it is very important that you shop for rates. There are about 40 homeowner carriers still writing in Florida,” she said.
When you are getting quotes, do not make the decision solely on price.
“The financial stability and claims reputation of the company, among other things, are just as important. Also, ask the insurance agent to discuss the coverages with you. Know what you are getting so that you are correctly comparing apples to apples,” she said.
Collier had some other advice.
“If there is one quote that is different by a significant margin than all the other quotes, find out why. If it sounds too good to be true, it usually is. You don’t want to find out at claim time that you are missing a coverage that is important to you,” she said.
Collier has been in the insurance business for 15 years, three years at her owner-operated location of Brightway Insurance in the Foxmoor Plaza in North Fort Myers, 5660 Bayshore Road, Suite 45.
To contact her, call 731-2007.