As Hurricane Idalia made its destructive way across northern Florida, Georgia and South Carolina, it was a reminder that this has been a tough year for natural disasters. Tropical storms and hurricanes, historically bad forest fires and power outages during killing heat waves occurred this year and the expectation is these will continue.
The people in the path of wildfires or tropical storms have been the biggest sufferers, but the property and casualty insurers are also feeling the impact. Last year was one of the costliest years on record for natural disasters, with $120 billion in insured losses, roughly on par with 2021. We shudder to think of what the costs will be for 2023. Florida residents are already spending an average of $6,000 dollars on home insurance policies, four times more than the average in other states. Not only are rates rising but finding insurance coverage is getting more difficult.
Earlier this year, State Farm, California’s largest property insurer, announced that it would stop accepting new applications for all property and casualty insurance in the state, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” Farmers Insurance followed, putting a cap on the number of policies it writes in the state. And Allstate, last year, announced that it would no longer write new homeowner policies in California. And in Florida, within the last month or so alone, Farmers Insurance announced that it was pulling out of the state’s market to “effectively manage risk exposure,”. Shortly after, AAA said it would not renew a “very small percentage of higher exposure homeowner’s policies in Florida,” because of the state’s “challenging market.
Some homeowners who have paid off their mortgage have decided to drop their homeowner’s insurance, particularly among the wealthy, who feel they have enough money saved to rebuild or move elsewhere should their home be destroyed. But it is better to have the correct coverage of home, renters or condo/coop insurance and find more practical ways to reduce your insurance costs, like:
- Review your insurance every few years: did you have any renovations that added to the value of the house; what is the market value? Did you increase the value of the contents?
- Be sure that your house is insured for 85% or more of its value, otherwise you will not get a full insurance settlement if there is an insurable event.
- Regularly compare rates and policies. An insurance broker who represents many companies can help, but many insurance companies only sell direct to consumer. You can also go to the library and look in Consumer Reports magazine for their latest insurance company review
- Install a security system (smoke and safety) that monitored by a central station or is connected to the local police
- Raise your deductible; this will reduce your premium.
- Think carefully about renovations, consider the materials being used, wood framing increases rates, not so with steel and cement. Be aware that adding a pool can raise premiums by 10% (so do trampolines).
- Pay off your mortgage, insurers will think you will take better care of your home if it is 100% yours.
- Make sure you notify your insurance company if you take out the pool, dismantle and sell the trampoline, add a fire sprinkler system or make any improvements that make your property safer.
Don’t forget to include liability insurance, one of the most important parts of home and renter’s insurance. If you are sued due to something that happens in your home or on your property, liability insurance not only provides monetary coverage, you are represented by the insurance company’s lawyers who are experienced in these types of legal cases.
In general someone can sue you up to the value of your assets and income, so if the value of your assets is more than $1 million, add an umbrella policy. This way you can raise your liability protection.
