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With Florida’s high property insurance rates, many are forced to ‘go bare’

The number of Florida homeowners with no property insurance is nearly double the national average, according to one estimate.
Lenny Lempenau crosses floodwaters that completely covered County Road 661 on Friday, Sept. 30, 2022, in Arcadia.
Lenny Lempenau crosses floodwaters that completely covered County Road 661 on Friday, Sept. 30, 2022, in Arcadia. [ LUIS SANTANA | Times ]
Published Dec. 13, 2022|Updated Dec. 16, 2022

TALLAHASSEE — As Florida’s property insurance market continues to buckle, thousands of homeowners across the state are increasingly choosing to forgo insurance, sell their homes or even leave Florida.

That is the conclusion of Tasha Carter, Florida’s insurance consumer advocate, who said Tuesday that she is “in communication with consumers daily who are absolutely worried about losing their homes because they cannot afford their homeowners insurance premiums.”

“I can absolutely say that the rising cost of homeowners insurance is really having significant impacts on homeowners and causing them to make drastic decisions on whether or not they stay in the state or whether they move,” Carter told the Times/Herald as legislators convened in special session to pass changes in an effort to stabilize the market.

“It not only impacts the seniors who are living on a fixed income, but it also impacts just working-class families and families that are at every economic level,” she said.

Related: In Arcadia, many residents without insurance struggling to rebuild after hurricane

Rep. Dianne Hart, a Tampa Democrat and chairperson of the Florida Legislative Black Caucus, said at a news conference in the state Capitol on Tuesday she hears the same dilemma from her constituents.

“When your insurance goes up $2,600 and your income does not change, we know that we’re in a crisis,” she said. “People are going to lose their homes.”

As Florida’s property insurance market has seen double-digit percentage increases for the past few years, it has become the nation’s most expensive place to insure a home. State regulators say they don’t track how many homeowners are choosing to “go bare,” but the Insurance Information Institute estimates that 13% of all Florida homeowners carry no property insurance, nearly double the national average of 7%.

“We have seen a slight uptick in Florida homeowners voluntarily dropping their coverage over the past couple of years because of the escalating cost of property insurance,” said Mark Friedlander, spokesman for the Insurance Information Institute. The choice is primarily made by those who have paid off their mortgages and are now on fixed incomes, or by residents paying cash to purchase their homes, “particularly those living in manufactured homes.”

Legislators this week met in special session to fast-track approval of a series of proposals hammered out by Republican leaders and the staff of Gov. Ron DeSantis behind closed doors. They say that relieving the cost burden for homeowners is the goal, but helping insurers avoid insolvency is the priority.

Related: Lower insurance rates not coming soon, Florida lawmakers say

Rep. Tom Leek, an Ormond Beach Republican and one of the bill’s sponsors, said the package of proposals, which includes reducing the financial incentives to file lawsuits against insurers, giving homeowners less time to file a claim and creating a $1 billion taxpayer-funded program to provide backup insurance for struggling insurers — will eventually lead to lower property insurance premiums.

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Fears of foreclosures

Hart and other members of her caucus warn that high property insurances costs could result in a surge in mortgage foreclosures.

“I think about the thousands of people that we put through the first-time homebuyers programs over the last 10 or 15 years that are in those homes now,” said Sen. Rosalind Osgood, a Tamarac Democrat who is CEO of the Mount Olive Development Corp., which works with first-time homebuyers.

“Now, all of those contracts, and thousands of people, are in jeopardy of losing their homes,” she said. “Many single moms, single dads, who we sold the American dream of home ownership, now find themselves foreclosed on, or having to sleep in their cars because they don’t have the extra insurance money.”

Even bankers and mortgage insurers who finance people’s homes are worried that the reforms may not do enough to prevent turmoil for many homeowners.

“Bankers by rule are cautious, and they’re a little bit concerned about people’s ability to pay insurance, what’s happening with inflation and other economic headwinds,” said Anthony DiMarco, executive vice president of the Florida Bankers Association.

He warned that when homeowners receive their new escrow statements next year, many will face sticker shock. Escrow accounts help homeowners set money aside each month to cover insurance premiums and property taxes. When the costs rise, the mortgage lender requires homeowners to set aside more money to cover their monthly payments.

“Homeowners may not be able to pay or they may just say the heck with it, and we’re not going to pay our mortgage,” he said.

If homeowners drop their windstorm insurance coverage and continue to carry a mortgage, the lender can purchase coverage to protect its interests and charge the homeowner for it. The process, known as lender-placed or force-placed insurance, usually carries a higher premium cost.

Impact on Citizens Property Insurance

The changes approved by the legislature also include forcing some homeowners out of the state-backed Citizens Property Insurance by not allowing them to renew their policy if a private insurer offers them a rate that’s not more than 20% higher than Citizens. In addition, every Citizens policyholder would be required to purchase a flood insurance policy by 2027.

Related: Florida lawmakers reveal major proposed changes to property insurance laws

But some legislators warn that this policy could force more homeowners, who went into Citizens because they either couldn’t find or couldn’t afford the insurance available on the private market, into economic distress.

“How is it that certain people that can’t afford the private market can get around the 20% rule?” asked Sen. Ileana Garcia, a Miami Republican. “Who protects the policyholders from the companies that denied them? How does cutting litigation costs benefit the policyholder, now?

“What about the ones that are going to be faced with an inevitable sale of their home when they don’t want to because they can’t afford it?”

Sen. Jim Boyd, R-Bradenton, an insurance agent and the sponsor of the Senate insurance bill, answered that if the proposals pass, private carriers will “come back, bring capital back into this market … and then that drives opportunity, drives competition, which will drive rates down.”

He said that if people choose to voluntarily drop their insurance coverage because they have no mortgage, that’s their choice, but “I’m not willing to force something on them.”

“I would advocate people need to protect what in most cases is their most valuable possession or their biggest asset,” he said. “Some choose not to. Some can’t get it” but consumers should “make their own minds up as to what they want to do.”

Carter, the insurance consumer advocate, said she advises people to consider their options before dropping their insurance. Among them:

• Work with an insurance agent to shop around and try to find multiple insurance quotes.

• Consider taking a policy with a higher deductible but a lower premium and take advantage of all policy discounts, such as is often offered when you bundle an auto insurance policy with a property insurance policy.

• Invest in ways to fortify the home through hurricane-proof windows and doors, strengthening roof or wall connections or reinforcing your garage door.

“All of those additional features will not only help to strengthen your home but they’ll also reduce ... subsequent insurance claims,” Carter said. “And then the homeowner will also be eligible to receive wind mitigation premiums as well a lower repair premium.”

Neither the state office that regulates banks, the Office of Financial Regulation, nor the state’s Office of Insurance Regulation, keeps track of the people who choose not to carry property insurance.

Osgood, the Tamarac Democrat, wants an income-based option to allow people who meet an income threshold to be able to carry Citizens Property Insurance at below-market rates until the market stabilizes.

“Sometimes with public policy just basic human decency — that might not fit the math equation for profit — has to be a concern of those that are elected by the people, for the people,” she said.