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For Florida Real Estate, Homeowners Insurance May Be A More Important Issue Than Taxes

I attended a very informative windstorm insurance session at the Miami Realtors Association this afternoon.  The presentation by Lee Gorodetsky, The Home Insurance Guru and President of L & S Insurance, was my third insurance update of the year because that is how much of a moving target Florida insurance has become.

So why is property insurance a more important issue than taxes in South Florida?  It is not because hurricane Sandy is churning off the coast of our neighbors in the Bahamas.  It is because we only have a sales tax and property tax, no state income tax and Citizens, what has been the major insurer in Florida, is so grossly overexposed that it is changing all of the rules to minimize it’s exposure if The Big One hits.

In Miami, property insurance prices for a primary or secondary home range from 1-3% of the replacement cost of the home, calculated by multiplying the living area square footage by $135 for an average standard home.  Luxury homes would use a higher dollar amount.  The 1% is for homes built after 2006 that receive all of the current wind mitigation credits.  Most homes are closer to the 3% range.  Property insurance runs at about 2% of the purchase price and as long as you have homestead exemptions, it cannot go up more than 3% or CPI per year, whichever is lower.

The rates on Citizens insurance are expected to increase dramatically next year to raise money to try to close the gap they have between their reserves and their risk exposure.  They will also be dropping an estimated 300,000 policies, mostly in south Florida.

There are three amendments relating to property taxes on this November’s ballot and not one amendment addressing insurance.

Related Post:  Hurricane Insurance:  Will It Be The Next Shoe To Drop In The Recovering Real Estate Market

Hurricane Insurance: Will It Be The Next Shoe To Drop In The Recovering Real Estate Market

I attended a Citizens Property Insurance Round Table sponsored by State Representative Frank Artiles and Senator Oscar Braynon to discuss the proposed changes to Citizens’ current 10% rate increase cap.  In an attempt to decrease the State of Florida’s financial exposure in the event of a major hurricane, Citizens has already removed some 17,000 policies from their coverage, eliminated or modified the amounts that will be deducted from a homeowners premium for mitigation upgrades, tightened their requirements on insurance based on useful life of the roof, and raised premiums.  They no longer insure properties over $1 million.

Although I understand that the State of Florida does not, and probably should not, want to be in the insurance business, there are no other viable alternatives for windstorm protection in this state.  If Citizens is allowed to remove the current cap on increases, premiums for coverage in South Florida could jump between 50 and 95%.  Buyers who recently purchased their homes or investment properties could be in a situation where their insurance premiums go up to the point where their planned housing budgets get thrown completely out the window.  I have several buyers who, after qualifying for Citizens for their purchase, were contacted a couple of months after they closed to be told that they need another inspection or were dropped when their policy came up for renewal.

For the 31.4% of homeowners in Florida with mortgages under water, and the 10.1% of those who are 90 days behind on their mortgages, the current and proposed changes, are just one more huge financial hurdle for them to overcome.

Several issues were raised during the round table that need addressing:

1) Currently, Citizens offers more than just windstorm insurance.  Why the state should be insuring against a home’s plumbing leaks and other non-nature related claims, which happen more frequently than “the big one” is beyond me.  Citizens should only be for windstorm and maybe sinkhole insurance.

2) Although there have been way more storms in northern Florida counties, and all 67 counties in the state are prone to a direct hit,  the southern counties would be paying much higher premiums for same priced properties.

3)  Citizens got rid of the appraisal value for another mechanism of figuring out replacement value, even though their mechanism results in significantly higher replacement costs and therefore higher premiums.

4) Citizens has spent a huge amount of money in legal fees fighting claims.  If the claims are fraudulent, I am all for it, but it appears these are claims that they are supposed to be paying.

5) The need for national disaster insurance coverage that covers all natural disasters from flooding to tornadoes, hurricanes and earthquakes.  If you look at the map from NOAA below, most states along the Gulf and east Coast have been hit by hurricanes.  I wonder what their states’ insurance looks like?

 

If you are looking for reliable insurance agents who are well informed on the current and proposed changes to Citizens and who have other insurers available, contact Phil Lyons at Insource or Alvaro Murillo at Macpherson Insurance Agency.  Please share your comments and concerns regarding Citizens insurance.  The Miami and Florida Association of Realtors are following this issue very closely.  You can also send your suggestions to Citizens at [email protected].

Tags: hurricanes south florida, Miami Real Estate

Hurricane Season Has Arrived

Okay, I know the Heat are hot in their NBA playoffs and tonight’s game against the Celtics is the talk of our town, but it is June 1st and the start of hurricane season.  Actually, the season got off to an early start with two named storms already in May.  Please take the time before a hurricane is on the radar and follow the tips in the Miami-Dade County Hurricane Preparedness Guide

Tags: hurricanes south florida

Hurricane Season Coming Up June First

 Hurricane season can be a bit of a roller coaster ride with storms swirling out at sea, uncertain projection paths, and an onslaught of news coverage if one comes even close to making landfall.  Take some of the worry out of the season by going through your check list now and making sure your home is protected.

 

Hurricane Season Starts Today

Based on NOAA’s predictions, this will be a busy hurricane season.  South Florida is always on the ready, but it has been a while since we have had a hurricane in Miami-Dade County so, if you need to dust off your hurricane plans, do it now.

Tags: hurricanes south florida

Miami Counts Down to Hurricane Season

I am not talking about the University of Miami’s football team here, which is a much anticipated season, but rather the real hurricane season, which is right around the corner officially beginning June 1.   Whether you recently moved here or have lived here for ever, now is the time to prepare your property.  There are a million hurricane guides, issued by everyone from the Miami Herald, the State of Florida, Miami-Dade County, and the University of Miami, to help students away from home prepare for a storm.

The links above are great for the specifics of how to address the main items you need to consider:

1) Have a plan.  Where will you go if you have to evacuate?  Will you be able to take your pets?  If you don’t need to evacuate, make sure you have all the supplies you will need to take care of yourself, family and pets for at least 5 days after a storm.  This includes cash, gas, food, water, flashlights/batteries and prescriptions.

2) Record and secure your belongings.  Take pictures or, better yet, video of your entire property: outside and inside, room by room.  Make sure you have all of your insurance and bank information in a safe place that you can take with you if you need to evacuate.  Make sure you have shutters or plywood before the season starts.  You don’t want to be running around at the last minute with all of the other procrastinators looking for supplies.

Related Reads:

Preparing for a Hurricane – A Way of Life in South Florida

Tags: preparing for hurricane

Preparing for a Hurricane – A Way of Life in South Florida

If you recently moved from outside of a hurricane zone, you are in for some excitement and new lessons from Mother Nature.  Hurricane season officially starts June 1 and storms can approach rapidly, so it pays to inform yourself on what you need to do now to be ready when a storm approaches.  The good thing about a hurricane, compared to other natural occurrences such as earthquakes and tornadoes, is that you did get warning and have time to safeguard yourself, your property, pets, and family.  Believe me, having lived through several, it pays to be prepared!

This year, Hurricane Preparedness Week will be held May 24 through May 30.  NOAA’s National Hurricane Center, conveniently located in South Florida, has a comprehensive hurricane plan.

Even though you may remember the pictures of Louisiana after Katrina, take the time to watch the video below to see the damage a storm is capable of.  Hurricane Wilma came toward the end of the season and still managed to do quite a bit of damage to South Florida

[youtube]http://www.youtube.com/watch?v=jOgdYCvGvQw[/youtube]

Tags: hurricane preparedness, hurricanes south florida