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Why Is My Florida Homeowners Insurance So Expensive?

for Bradenton, Sarasota, Lakewood Ranch and Beyond

Nov 18, 2015

So you bought a home in the Sunshine State. With 663 miles of beaches, 3,000 hours of annual sunshine, warm, year-round temperatures, and a low cost of living, what sun-loving individual wouldn’t want to call Florida home?

However, the costs that come with buying a Florida home aren’t as sunny as one may think. In fact, Florida homeowners are currently paying double the national average for home insurance. With the national average of homeowners insurance costing $933 per year, Florida homeowners pay $2,084 - a rate that’s nearly doubled in the past decade.  

Furthermore, this average rate of insurance premiums is strictly for common types of homeowners policies; additives to these policies increase the cost even more. So why is homeowners insurance in Florida so expensive? Below are the leading reasons.

Natural Disasters and the Reinsurance Market

Even though the state hasn’t suffered a devastating hurricane since 2005, other natural disasters have caused reinsurance rates to remain high. Reinsurance is an added layer of insurance coverage that is purchased by insurance companies to pay catastrophic loss claims.

Unfortunately, when insurance companies purchase reinsurance, a significant portion of the cost is passed to clients, making it a key factor in determining homeowners rates. An above-normal frequency of natural disasters like thunderstorms, hailstorms and tornadoes have caused insurance companies to maintain higher reinsurance costs to prevent losing money in the event of a catastrophic natural disaster.

The 2010 Hurricane Model Spiked Permanent Rates

In late 2010, Risk Management Solutions, a widely used hurricane modeling company, developed a new wind-estimate model that predicts the damage hurricane winds could potentially cause. This model highlighted the fact that, as a hurricane moves inland, Florida insurers were at a higher risk of damage than previously thought.

Once insurance companies caught wind of this new model, many bought additional reinsurance in anticipation of future storm systems. The more reinsurance companies purchased, the more homeowners were forced to pay.

Regulators and Politicians

Additionally in 2010, The Florida Office of Insurance Regulation approved an average homeowners insurance increase of 18.7 percent. Regulators also said that certain voluntary discounts to the hurricane portion of the insured’s premium would no longer apply, and Florida Gov. Rick Scott endorsed a plan from Citizen Property Insurance, a leader in Florida homeowners insurance, to increase rates between 6 and 11 percent, depending on the type of policy.

Furthermore, a legislative session in 2011 gave property insurers the freedom to easily raise annual premiums up to 15% in order to cover reinsurance costs. Now nearly five years later, these regulations and policies continue to affect the rates of Florida homeowners insurance.

Hiked Rates By Citizens Property Insurance

As mentioned above, Citizen Property Insurance is a widely used, state-run insurance company that provides coverage for a large portion of Florida homeowners who are unable to find coverage on the open market. With more than 1.3 million policyholders, Citizen Property Insurance sets the bar for other insurance companies around Florida.

Once Citizen Property Insurance was given the OK to hike rates up to 11% by legislators, other companies took note. The rising rates from leading insurers like these required independent insurance companies to raise their rates simply to remain competitive.

Non-hurricane Threats

Even without the destruction of recent hurricanes, another significant reason for increased homeowners insurance is sinkhole claims. Florida has more sinkholes than any other state in the nation, causing a new wave of Florida laws to narrow the definition of sinkhole damage. These laws have forced homeowners to pay more for the cost of testing for sinkholes, which in reality should save homeowners from future sinkhole claims. Nevertheless, insurance companies have paid more in sinkhole claims which plays a role in higher rates.

Getting Reasonably Priced Homeowners Insurance

Since 1954, Bradenton Insurance has been protecting homeowners and residents of Florida’s West Coast with reliable, affordable insurance plans. At Bradenton Insurance, we understand the importance of finding the right coverage for all of your needs and are dedicated to helping you create that perfect plan. With competitive rates, great full-coverage options, customizable policies and much more, Bradenton Insurance is the ideal independent insurance agency for you. Visit our website for more information today or give us a call at 941-748-0511 to talk with one of our friendly specialists!

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