One of the most contentious and confusing topics for buyers, sellers, and homeowners in Florida right now is insurance. The lack of options for private carriers, new flood insurance requirements from Citizens, and fear of being dropped have everyone on edge, and for good reason.
To help make everything more digestible and give you the information you need to make an informed decision—whether you’re a buyer, seller, or homeowner—we’ve enlisted the help of a trusted expert to give us a breakdown on all things insurance.
Lindsey Decollibus-O’Donnell, Director of Business Development at Florida Best Quote, has worked in the insurance industry in Florida for over 15 years.
A Look at the Market
To understand insurance in Florida, it’s necessary to take a historical approach. Citizens Insurance, the state-run property insurance option, was never meant to be the main insurer in Florida. Citizens was established by the state to provide insurance to Florida homeowners who otherwise could not find insurance through a private company. So how did we get to the point where Citizens became the major insurer in the state?
In 2005, hurricane season brought five named storms—one tropical storm and four hurricanes—that made landfall in Florida, causing billions of dollars in damage in a mere six weeks. The Florida Health Department states that 2004 was “one of the most active, destructive, and costly hurricane seasons of the past century.
After that hurricane season, private insurance companies left the state in droves. Citizens found itself the de facto insurance company in Florida because of the lack of options.
Bring on the Fraud
And then there’s the fraud issue. In Florida, contractors and attorneys got together and started going door-to-door, asking people if they wanted a new roof for free. In order to get the free roof, all the homeowners had to do was sign a little form called “Assignment of Benefits,” which effectively transferred ownership of the benefits of a homeowner’s policy from the homeowner to the contractor.
“At that point, the contractor has full rights to the policy and can make claims on the policy,” Decollibus-O’Donnell explains.
To sweeten the pot for attorneys, one-way attorney fees and attorney fee multipliers made it so that if the contractor (who now has rights to your policy because you signed that form) sued the insurance company and won, the insurance company had to pay the attorney fees AND the attorney could charge up to three times their standard rate.
“It got to the point where they weren’t even filling claims. They’d just file lawsuits. So the client would get paid $20,000 for their new roof, and the attorney is getting $250,000. In 2021, Florida only accounted for 8% of insurance claims but 80% of all litigation against carriers.”
Great… but What Does This Mean for Me?
It means things are a little tough right now. It means rates are high, choices are limited, and then there’s that whole thing where Citizens has started the process of requiring flood insurance for all of its policyholders who also carry wind coverage.
But Wait… This Isn’t All Negative
The good news, Decollibus-O’Donnell says, is that the state is moving in the right direction.
In 2022, the state passed legislation to curb costly fraud to attract standard market carriers back to the state. And it’s working!
“Insurance companies want to be here. They want to write in Florida. We have to remember that these things take time.”
Barring another active and costly hurricane season, Decollibus-O’Donnell says that we could start seeing rate relief and an increase in private insurance options in the next year to 18 months.
In the Meantime, What Do We Do?
First, remember that your home is a long-term investment. Florida’s insurance scene wasn’t great in the past, and it corrected itself. We believe it’ll do so again. When thinking long-term, remember that a few years of high insurance costs is definitely frustrating, but it’s not forever.
Understand the Importance of a Sound Roof
Decollibus-O’Donnell says that during the buying and selling process, the roof is a major component. Roofs need to be in good condition and have a minimum of five years of life left to get insurance. The buyer and the seller’s agents need to know what the state of the roof is on a property, and they need to communicate early and often about it.
Ensure you’re working with a real estate professional with access to reputable, seasoned insurance agents who understand the market. Make sure your agent isn’t afraid to have open and transparent communication with the seller’s agent about insurance and the property.
“Get your inspections done right away, during your due diligence period, and get insurance quotes during that period as well,” Decollibus-O’Donnell suggests. “Get the inspections to the insurance agent right away so that you can get an accurate quote.”
If your house is on the market, you want it to move fast, and insurance-specific issues can cause delays or, worse—might mean the deal falls through altogether. There are things you can do to make sure that doesn’t happen.
Before you list your home, pay for the four-point inspection. It’s typically $80-120 and worth the knowledge you’ll gain. The inspection covers the roof, HVAC, plumbing and electrical systems. A potential buyer will have trouble getting insurance coverage if there’s an issue with one of the home’s major systems.
“Getting the inspection means you know immediately that a buyer is going to have an issue getting insurance if one of these major systems has an issue. With the information though, you can either choose to make the repairs or replacements before you list your house, and if that isn’t an option, you’ll know what you need to do to get the house to contract.”
Preparation is Key
Make sure you have a real estate agent that understands that an insurance professional needs to be a part of the buying process as early as possible to avoid delays.
In Florida, the rules are different than they are in other states, so having an insurance agent as a part of the buying process is critical.
“In other states in the US, you can get rates from 8 companies within $20 of each other. Without photos. That’s not the case in Florida. Your insurance claims that you filed at previous residences follow you in Florida, and if there’s been a claim on that property, that follows the seller too. All of this can affect your ability to get insurance and your rates. Make sure agents are communicating right away on major issues.”
Things are difficult right now, but it won’t be like this forever. It is so, so important to remember that your home is a long-term investment. Treat it that way, and short-term insurance issues or high premiums don’t mean all that much in context.
“Rates are high right now, getting insurance it tough right now, but this is not forever. We came back after the 2004-05 hurricane season. In 2010, Citizens was the only option, and by 2015, we had a ton of carriers, rates were good, and everyone was happy,” Decollibus-O’Donnell says.
And if you’re buying or selling a home right now, remember that the real estate agent you work with matters. You want someone who has access to insurance knowledge and agents who know what they’re doing. You can and will get through the process with more ease if you have a knowledgeable agent on your side.