Homeowners in Florida just can’t catch a break when it comes to quickly rising insurance rates. While the current focus seems to be on the changes made to flood insurance rating, Evolve Insurance Agency has learned of the next ‘big thing’ to affect your homeowners insurance renewal rate – and it’s inflation. We were recently made aware that Citizens Property Insurance Corporation – the Florida state sponsored insurance carrier commonly referred to as “the carrier of last resort” – expects policies renewing on or after January 1, 2022 to see significant coverage increases due to inflationary pressures associated with the cost of building a home. It’s estimated that inflation factors may be as high as 25% - which is over 6 times higher then the normal insurance inflation factor.
Homeowners insurance in Florida is designed so the coverage responds with the necessary limits needed to rebuild the home in a similar manner, but at today’s costs. Due to this ‘design’, your insurance policy contains a provision that allows the insurance carrier to increase your coverage to coincide with rising building costs. This is done in an attempt to keep your home adequately insured and lower the potential of being ‘underinsured’ in the event of a major claim. With all of this in mind, I’m sure you see where this is going. It’s no secret that the ongoing COVID-19 Pandemic has caused shockwaves to ripple through the homebuilding market, and as a result the costs to rebuild a home have increased significantly. This significant increase means the inflationary factor is going to be higher than a typical year – much higher.
So, this means your next insurance renewal will likely come at an even higher price. Your insurance rate is directly tied to the amount of coverage purchased – and since you have little control over the costs to rebuild your home, you will have little control over this rate increase. By design, you are not permitted to grossly underinsure yourself, so simply ‘requesting for the coverage to be lowered’ won’t be an option for most consumers. This is going to be a tough pill to swallow for many homeowners over the next year, but it’s a reality we must be aware of, and should all start to plan for. If you are concerned with how this might affect you or your insurance, please contact your insurance agent or carrier directly to inquire specifically about your policy.
Frequently Asked Questions:
- I only owe $50,000 on my mortgage, why can’t I insure my home for only that amount?
Answer: Before I start to explain why, it’s important to realize one very important thing – the vast majority of paid insurance claims are for an amount much lower then the selected policy limit – and this is key. With regards to homeowners insurance in Florida, it provides coverage for the home based on ‘replacement cost calculations’ in the event of a claim. This means if you have a kitchen fire and need a new kitchen, your insurance will pay to replace the kitchen with brand new items and material, without deducting for depreciation based on age, wear, or tear. Put these two together and this is why. Rates are calculated based on the assumption that the carrier is getting the premium needed to cover the home for it’s estimated replacement value while also knowing most claims that are covered and paid amount to much lower than that. If consumers were allowed to insure for whatever amount they wanted, the rates would not reflect that flexibility. This is why, by design, you are not permitted to buy homeowners insurance for a value that is considered underinsured.
- So does this mean I have no control over the amount of insurance I buy?
Answer: No – that is not what this means. You have flexibility, but not necessarily ultimate control. Insurance companies establish guidelines and ultimately develop a “risk appetite”. In order to secure insurance and keep insurance, you have to remain eligible for an offer of coverage (aka. a “quote”) from an insurance carrier, and that means playing by their rules and following their guidelines. But, like I said there is flexibility – the replacement estimate is an estimate at the end of the day, and we are no experts. If you have concerns about the value of your insurance, call our office and ask us to review it. We will re-run your calculations based on the tools we have at hand and provide a recommendation, as well as an “acceptable range” for selecting the coverage limit.
- I want a quote for my homeowners insurance, how do I do that?
Answer: That’s easy! Simply give our office a call at (941) 244-2760 or visit our quote request page here: https://evolveins.com/online-insurance-quotes and a member of our staff will get to work right away on finding coverage that fits your needs and budget.
David Kronk Jr
Owner, Evolve Insurance Agency