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Why are Homeowners Insurance Premiums so High in Florida?
Table of Contents
Homeowners' insurance policy premiums in Florida tend to be extremely high.
Those buying a home in Florida may experience sticker shock when it comes to their higher homeowners' insurance policy premiums. Why are homeowners insurance premiums so stratospheric in Florida, and how can the standard homeowner help keep costs from rising even more?
The Story Behind Florida Home Insurance Costs
Legislation particular to Florida property insurance, the state's susceptibility to hurricanes, and a rising rate of insurance fraud have all contributed to the state currently costing homeowners almost twice as much for insurance as in other states.
Insurance Rate Factors from 2005-2010
In 2011, a study based on the Insurance Information Institute's report including a summary of the Florida Property Insurance Market was completed of the Florida homeowners insurance industry, which revealed that:
- Costs of non-catastrophic claims had risen 17% per year since 2005
- Since 2005, property losses had increased by 80%
- Between 2005 and 2010 there'd been no hurricane landfall that only prompted more worry about the costs of the next big storm in damages
- Between 2005 and 2010, the time frame to report and claim hurricane damage increased from 1 to 5 years, allowing retroactive claims for Wilma
All of these factors led to substantial increases in homeowners' insurance rates, and the trend continued when a new problem started to appear with alarming frequency.
Assignment of Benefits Fraud
When a home is destroyed, an insurance claim must be made to the carrier.
When a home is destroyed, an insurance claim must be made to the carrier, which can then assess the damage and provide the appropriate compensation based on the homeowner's coverage. However, unscrupulous contractors often make a practice of targeting homeowners after a storm or other event, promising to save the homeowner money by keeping them from paying their deductible. All the homeowner has to do is sign an Assignment of Benefits, or AOB, form.
Many homeowners don't know that by signing the form, they sign away their rights – allowing the contractor to inflate costs and then use an attorney to sue the insurance company if the carrier objects to the fabricated charges. A recent report titled "Restoring Balance in Insurance Litigation," referencing AOB fraud shows that between 2010 and 2011 litigation against insurance companies spike a staggering 66%, and the increases have continued; Florida's population rose only 26% between 2010 and 2016, but lawsuits against insurance companies have risen 280%.
How can the average homeowner help fight back against AOB fraud? Always call your insurance company first to report a claim. Also, never sign an AOB form unless your insurance company directs you to do so. Stopping AOB fraud is the surest way to help prevent insurance rates in Florida from continuing to rise.
