South Florida Real Estate
Archive for the 'Hurricanes' Category
A couple of weeks ago, I wrote a post about how cheap flood insurance is if you don’t live in a flood zone. After last Wednesday’s heavy rains, even many of us who do not live in flood zones witnessed flooded streets and front yards. Before you go out and buy flood insurance, you need to be aware that on Tuesday, October 1, federal flood insurance rate hikes kicked in. That does not mean you should not get the insurance, since it is still affordable compared to other forms of insurance, but depending in what flood zone you live or are buying, in, the rate hike could increase nearly tenfold. If you purchased prior to July 6, 2012, the increases will be at 25% per year until you reach the new non-subsidized rate. Many states, including Florida, are trying to delay the federal hikes until the impact on the real estate market can be taken into consideration, but the current congressional stalemate has tied up the bill.
The second insurance factor to consider when buying your home is hurricane insurance. By now everyone has heard that Citizen’s, our insurer of last resort, wants to get out of the insurance business and is giving incentives to smaller insurance companies to take over windstorm insurance. Although wind mitigation discounts are still given, there is a good chance that insurance premiums are going to increase fairly significantly. Both of these insurances should be taken into consideration in your financial calculations when you are purchasing your home. Phil Lyons, at Insource Insurance, can assist you in determining how much properly insuring what is most likely your biggest asset will cost.
Many areas in Miami are in flood zones and, if you are purchasing a property with a mortgage, you will be required to carry flood insurance. However, there are many areas in Miami that are not considered flood zones. I received a little flyer from FEMA letting me know that although I am not in a flood zone, I am less than a mile away from a high-risk flood area. According to FEMA, this means that I have at least a 1-in4 chance of flooding during my 30-year mortgage.
Considering how cheap flood insurance is, as low as $129 per year if you are not in a flood zone, I think it is worth getting. Especially in storm-prone South Florida.
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
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].
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
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.
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.
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.
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!
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