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Navigating Florida’s Insurance Quandary: Challenges for Homebuyers

Florida’s Home Insurance Dilemma

Florida’s ongoing insurance crisis is casting a shadow on Gernelle Bokuniewicz’s clients’ quest for their dream retirement home in Winter Park, Florida. The predicament stems from skyrocketing homeowner’s insurance premiums that are becoming a growing obstacle for homebuyers in the state.

Rising Insurance Costs: A Barrier for Homebuyers

The frustration began when Bokuniewicz’s client received a staggering homeowner’s insurance premium quote of $17,000 annually, a substantial increase compared to the current owner’s $5,000 for the same coverage. The situation escalated when the insurance company withdrew its quote, citing the property’s high risk. This left Bokuniewicz’s clients in a race against time to secure an alternative insurer before their home purchase deal falls through.

“I’ve encountered issues in the past, but nothing like this, where I couldn’t find any insurance for a home,” said Bokuniewicz, founder of Lively Real Estate. “It’s pretty scary if there is nobody to provide insurance.”

The Expensive Reality of Home Insurance

Floridians are already burdened with the highest home insurance premiums in the United States, averaging $6,000 per year in 2023. This represents a substantial year-over-year increase of 42% and is 3.5 times higher than the national average of $1,700.

David Pojero, an insurance agency owner based in Debary, Florida, noted, “If you were to go back to 2019, our average premium in this office was about $900 for a home. It’s $2,400 today.” The surge in premiums is a significant change that homeowners are grappling with.

Factors Behind Florida’s Insurance Crisis

Florida’s insurance crisis can be attributed to escalating reinsurance and litigation fees. As hurricanes have become more frequent and severe, reinsurance rates have surged by 45% to 100% in January 2023 and an additional 20% to 40% following Hurricane Ian, which incurred nearly $114 billion in adjusted costs.

The recent repeal of the “one-way attorney’s fee” provision, which required insurers to cover reasonable litigation fees for policyholders in case of successful claims against the insurance company, has contributed to rising insurance costs. While intended to reduce insurance expenses, this legislative change may place a financial burden on Floridians seeking compensation from insurance companies.

Challenges Faced by Homebuyers

Florida’s homebuyers are now grappling with the repercussions of these soaring insurance premiums. Obtaining homeowner’s insurance is typically a requirement for mortgage approval, and as insurers exit the state due to high costs, securing affordable coverage has become increasingly challenging.

The Safety Net: Citizens Property Insurance

For uninsurable homes, Florida offers Citizens Property Insurance as a state-sponsored option. However, it comes with various limitations and restrictions and is considered the “insurer of last resort.” Citizens is only an option if no other coverage is available, or if private alternatives are at least 20% more expensive. The coverage provided by Citizens is limited, with a total value cap of $700,000 (or $1 million in Miami-Dade and Monroe Counties).

Impact on Home Loans

These high insurance premiums have forced insurance agents to collaborate with lenders to adjust quotes, as homebuyers struggle to meet financing requirements. Pojero explained, “I have had several lenders contact me prior to closing, after we’ve issued a policy and say, ‘hey, we need this significantly lower because the debt-to-income ratio doesn’t work.'”

Balancing the need for affordable insurance premiums with adequate coverage is a critical challenge. Pojero stressed the importance of maintaining a certain coverage level to ensure that clients can reasonably afford property repairs in the event of a claim.

A Challenge to Home Closings

Homebuyers who cannot secure insurance, either due to a lack of private insurers or because their home values exceed Citizens’ coverage limits, may find it impossible to close on their mortgage. This added layer of complexity compounds the difficulties faced by buyers in an already challenging real estate market, marked by rising mortgage rates and elevated prices due to low inventory.

The Challenging Road Ahead for Florida Homebuyers

In summary, Florida’s insurance crisis has become a substantial obstacle for homebuyers, requiring innovative solutions to balance the need for coverage and affordability in a complex and costly insurance landscape.

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