If you’re a Florida homeowner, you may be wondering why your home insurance went up in 2022. There are several factors that can affect your premiums, and it’s important to understand them all so you can make the best decision for your family. Here are some of the reasons why your rates may have increased, and what you can do about it.
Unsustainable Claims
One of the main reasons why home insurance rates have increased across the state is because of unsustainable claims costs. In recent years, Florida has experienced a number of major hurricanes and other natural disasters, which have led to higher-than-usual payouts for insurers. In order to offset these payouts, insurers have had to raise rates for all customers.
To understand why Florida home insurance premiums are going up, we have to start with Hurricane Andrew way back in 1992.
Andrew was the most destructive hurricane to ever hit Florida in terms of structures damaged or destroyed and the costliest in financial terms. It was the costliest in the United States until Katrina in 2005. In response, the State of Florida created the Florida Hurricane Catastrophe Fund (FHCF) to help insurers cover claims from future hurricanes.
After a number of years of relative calm, Florida was hit by four major hurricanes in 2004 and 2005: Charley, Frances, Ivan, and Jeanne. These storms caused billions of dollars in damage and led to record payouts from the FHCF. In order to replenish the fund, the state increased premiums for all homeowners insurance policies sold in Florida.
Hurricane Irma in 2017 caused even more damage, with estimates ranging from $50 billion to $100 billion. Once again, this led to increased rates for Florida homeowners.
As you can see, a major reason why home insurance rates have gone up in Florida is because of the increased frequency and severity of hurricanes in recent years. As a result, insurers have had to pay out more in claims, and they’ve had to raise rates to offset these costs.
Risk Rating 2.0
Another factor that has led to rising home insurance rates is the new Risk Rating 2.0 system that insurers are using to calculate premiums. This system takes into account a number of different factors, including the age and condition of your home, your credit score, and your claims history. If you have any of these factors working against you, it’s likely that your rates will be higher than they were in the past.
There’s not much you can do about some of these things, like the age of your home or your credit score. But if you have a good claims history, make sure to mention it to your insurer when you’re shopping around for a new policy. It could help you get a better rate.
Home Insurance Scams
Another factor that’s driving up rates is the increased frequency of insurance scams in the state. In a typical scam, someone will file a false claim or inflate the cost of a legitimate claim in order to collect a larger payout from the insurer. This contributes to higher payouts for insurers, which in turn leads to higher premiums for all customers.
Assignment of Benefits
A third factor that’s causing rates to rise is the increased use of “Assignment of Benefits” (AOB) contracts. In an AOB contract, the homeowner signs over their insurance benefits to a contractor, such as a plumber or air conditioner repairman. The contractor then bills the insurer directly for their services.
While AOB contracts can be convenient for homeowners, they often lead to abuse. Contractors may inflate their charges or perform unnecessary work in order to collect a larger payout. This increases payouts for insurers and contributes to higher premiums for all customers.
What You Can Do
If you’re concerned about rising home insurance rates, there are some things you can do to protect yourself.
First, make sure you’re adequately insured. Many Florida homeowners only purchase the minimum amount of insurance required by their mortgage lender.
However, this may not be enough to cover the full cost of rebuilding your home in the event of a major disaster.
It’s also important to shop around and compare rates from different insurers. Home insurance rates can vary significantly from one company to the next, so it pays to do your homework.
Finally, be sure to take advantage of any discounts you may qualify for. Many insurers offer discounts for things like installing hurricane shutters or having a security system.
By understanding the reasons behind rising home insurance rates, you can take steps to protect yourself and your family. By shopping around and comparison-shopping, you
There are a few things you can do to protect yourself from scams:
- Educate yourself on the most common types of scams
- Don’t hire contractors going door-to-door
- Be aware of red flags that may indicate a scam
- Never sign anything without reading and understanding it first
- Get multiple estimates for any repairs that need to be done
- Only work with reputable contractors
Home Insurance Carriers Leaving the State
One of the reasons rates are going up is because some insurance carriers are leaving the state. This is due to the increased risk and frequency of hurricanes in Florida. When insurers leave the state, it decreases competition and gives those that remain the ability to raised rates.
The problem with this is that it can create a death spiral for the insurance market. As rates increase, more and more people drop their coverage. This leaves a smaller pool of customers to spread the risk around, which leads to even higher rates. And as Rates continue to increase, even more carriers will leave the state, further compounding the problem.
The only way to break this cycle is for the state to intervene and create some sort of reinsurance program. This would help offset the claims payouts that are driving insurers out of the state. Without some kind of intervention, it’s likely that home insurance rates will continue to rise, and fewer and fewer carriers will offer coverage in Florida.