With so many stories in the news about Florida's homeowners' insurance market, it's not surprising that homebuyers often ask me: "What's going on?" They've seen insurance companies leave the state, choose not to renew homeowner insurance policies, tighten policy eligibility requirements, and request substantial rate increases.
We know that Florida is a risky market because of the threat of weather-related damage. Its shape alone - a narrow peninsula- makes it a target for hurricanes that can affect not only coastal properties but inland structures as well.
However, in the last few years, insurance fraud has increasingly impacted the industry. And that's not good. Senate Bill 76, which went into effect in July 2021, included several provisions to curb fraudulent claims. In December 2022, Senate Bill 2-A was signed into law, further addressing the problem.
But it will take some time for the rest of us to see any positive impact. Because of expenses associated with ongoing litigation, as well as the escalating prices of construction materials and labor, homeowners' insurance rates here may very well remain high in 2023.
What can you do to make your home more insurable and lessen your chance of a policy cancellation? First and foremost, maintain your property, from regularly checking the roof and exterior to cutting away any branches that overhang the structure and could pose a threat. Most importantly, keep your roof in good shape- and if possible, replace it before it's 15 years old.
Then there's the 4-point inspection. Across the board, regardless of price point or location, most properties I've sold over the past 12 months have required a 4-point inspection. Keep in mind that many Winter Park homes are more than 30 years old, which means that a 4-point inspection will be required.
Such an inspection assesses the condition and life expectancy of four components: roof, electrical, plumbing, and HYAC. This tool provides a clear picture of the present state of a home and is used by insurance companies to evaluate the risk before writing a policy.
It's not uncommon for lenders to require that problem areas be addressed prior to dosing. Previously, we negotiated a credit against the selling price, which can still happen with all-cash deals. When there's a loan, however, lenders will require that the property be insured prior to closing, which often means that repairs will have to be done first.
The most common issues I've seen are related to electrical panels. Many homes have panels, such as those manufactured by Federal Pacific, that are considered uninsurable and will definitely require replacement.
Mason Riles, principal at Riles & Allen Insurance, explains that because of a large amount of claims activity in Florida, insurance carriers are really getting granular on inspection requirements prior to binding coverage.
Most of his carriers are now requiring 4-point inspections on any home more than 30 years old. Sometimes the company even sends out its own inspectors after the coverage has been bound.
So, as the year progresses, I expect more homeowners and potential homebuyers will be questioning what's going on with Florida's homeowners' insurance market. And we can only hope that legislation comes to the rescue.
