Though the new vaccines give us hope for a return to normalcy, one part of our lives that will never return to normal in 2021 is Home Insurance. Here’s what you can expect in Home Insurance in Florida in 2021.
Prices are going up.
It doesn’t matter who you have for home insurance in 2021, your price is going to increase. Most companies have filed or have already been approved for between 25 – 50% increases.
Why are prices going up? In one word: Claims. The higher the total amount that companies pay in claims, the more they will pass along to consumers in rate increases.
If a company earns $100 million in premiums, but pays $125 million in claims, you better believe they will pass that $25 million loss onto policyholders the next chance they get.
What kind of claims are driving prices higher?
Non-weather related water claims. These happen when pipes burst or fail, and the home is flooded with water
Many of us live in homes that are 25 years or older. Pipes are going to fail after years of use. Although home insurance policies will not pay to repair a failed pipe, they are on the hook for whatever damage the escaping water does to the home.
And that damage can be substantial and can be exasperated by:
Assignment of Benefits (AOB). Assignment of Benefits works like this. A contractor shows up to remove water from your home after a pipe fails. He has previously gone into business with an attorney before he shows up at your door.
The contractor explains to the home owner that he can handle the whole claim without the homeowner having to deal with any adjusters. All the homeowner has to do is assign the benefits to the contractor and no worries.
What the homeowner doesn’t realize is that the contractor then files inflated claims and when the insurance company refuses to pay, the lawyer springs into action by suing the insurance company. This adds many thousands of dollars to each claim which is passed onto consumers – even ones who never filed a claim.
Hurricane Irma. Did you know that you have 3 years after a hurricane to file a claim? It doesn’t matter if there were 50 storms in between, you still have 3 years to file a hurricane claim.
Most people believe that common sense would tell them within a couple of weeks or months whether they had hurricane damage to their home. Not in Florida.
You have a full 3 years to figure out that you were damaged in the hurricane. Of course, most people would file claims for their damage right after the damage occurred, but what if this happens?
One day you get a knock on your door and its a friendly local roofer. He tells you that he can tell that you need a new roof and what if he could get the insurance company to pay for it?
All you have to do is sign this Assignment of Benefits form and he will do all the work to get you a new roof. The company denies it, the lawyer sues.
The contractor starts work and even if the company doesn’t pay, the homeowner is bound by the AOB to pay whatever the company doesn’t. If they don’t, that same lawyer will sue them.
Reinsurance Increases: Insurance companies buy reinsurance to cover their own losses.
When Reinsurance companies see an increase in what they are paying in claims to insurance companies, they raise their rates.
They will also raise their rates when they see loss trends like they see in Florida, where claims that normally would cost a few thousand now cost tens of thousands.
They charge more to reinsure the insurance companies and guess what the insurance companies do? Right, they pass this increase along to consumers as higher home insurance rates.
There are few alternatives out there.
Most companies are restricting new business applications.
We have seen them closing zip codes, whole counties, or the entire state. They are also canceling and non-renewing policies based on claims experience, “Risk Reduction”, and even suspending Agent’s contracts to keep from accepting any new policies.
Renewals are Gold. If you are offered a renewal at a higher price, there’s a good chance you should take It! We’ve had dozens of calls from clients who have had home insurance increases at renewal and asked us to shop for alternatives.
The reality is that most companies are restricting new business – some while they wait for approval of their rate increases! And even if we find a company that is writing new business, every other company also increased their rates too. so there is little incentive to switch companies.
There’s always Citizens, but given the policy limitations and keep out restrictions, it’s not a guarantee that Citizens can help you.
Did you know that the Citizens quote needs to be 15% lower than your renewal for you to be eligible? And Citizen’s rates have gone up substantially in the past few years.
No worldwide coverage for Personal Property, a $100,000 limit on Liability, no coverage for gazebos, awnings, and screen enclosures as well as the possible 45% assessment, makes Citizens a poor choice for many clients.
Home insurance policies will have stricter limitations in 2021
And speaking of Citizens, they are leading the way in restricting non-weather water damage claims. As we have told you in another blog, they have strict limits on reporting and what they will pay for these claims.
And we want to warn you about restrictions many other Companies are instituting. Many insurance companies are restricting non-weather water damage claims to a total of $10,000. And most of these same companies are renewing policies with these same restrictions.
And some Home Insurance companies will not offer Water Damage at all in 2021.
As we advise our clients, it now more important than ever to READ YOUR POLICY. You need to know if these restrictions on water damage are included in your policy. Most of the companies will allow you to buy more water damage coverage subject to underwriting.
For example, if you have a newer home where the pipes are not so old, they will let you buy back the coverage. But if you own a home more than 25 years old without any updates, it may be tough to buy back the coverage.
What can you do about Home Insurance in 2021?
First, READ YOUR POLICY. Pay special attention to any limitations for water damage on your policy.
Most companies will advise you of any new endorsements via a letter or the actual endorsement and send it along with your new Declarations page.
Contact your agent. Ask if you can buy back any water limitations and how much that would cost.
Ask them if there are any alternatives in your zip code for homes in your age range.
Make sure to bring up any improvements to your home. Sometimes installing a new roof in the past couple of years can make you eligible for certain companies.
If no alternatives companies are available, go over the coverage on your policy.
The first item to check is your Deductible. In Florida you usually have two – one flat (AOP) deductible for Fire and other hazards, and one Percentage for Hurricane. Raising your deductible from $1000 to $2500 usually saves a good amount of premium.
Be careful. Make sure you realize that a 2% Hurricane Deductible on a $400,000 Dwelling coverage is $8,000, while a 5% deductible would mean $20,000 out of pocket before the company starts to pay.
You might look at items like Other Structures and Personal Property. Many companies automatically cover you for set percentages of your Dwelling amount.
So, $400,000 Dwelling coverage would default to $40,000 for Other Structures. If the only Other Structure you have is a basic fence, you might try reducing this to 2% or $8000 and save the premium.
Same goes for Personal Property. Many policies default to 50% or 70% of Dwelling automatically. So that same $400,000 Dwelling would give you $200,000 to $280,000 for Personal Property. Many families could get away with 25% or $100,000 and that can save money.
You might also try changing Replacement Cost coverage on Personal Property to Actual Cash Value (ACV). ACV depreciates your personal property, so a 5 year old couch that cost $2000 new, might only bring $1000 after a claim. But if you can live with that, you could save $100’s in premium.
The Near Future of Home Insurance
Until the Florida legislature can pass reforms, this is what the future will look like.
Did you know that even if an attorney loses a case involving home insurance, the carrier may still have to pay the attorney’s fees that sued them? Why wouldn’t they sue?
And do consumers really need 3 years to make a Hurricane claim?
It’s one thing to protect the consumer, but no consumer wants to be subject to constantly increasing home insurance rates because attorneys know how to game the system.
2021 is going to be a rough one for Home Insurance. Companies limiting new business, adding restrictions onto policies while increasing rates adds up to a lot of pain.
The best thing we can advise is to stay nimble and talk to your agent. Together we can help you weather this latest storm.
Low rates, choice of companies and personal advice.
Cronin Insurance is the Wise Choice.
