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