Experts say that many homeowners throughout the State of Florida are underinsured and that nearly 60% of U.S. homes are undervalued, with the average home undervalued by 22%. This means that most Floridians aren’t properly protected if disaster strikes.
Given Florida’s population boom, the growing popularity of coastal living, and increased hurricane activity, it’s important to have the information you need to educate your clients on current property insurance trends. This is true whether a client is simply moving within the State or relocating from another state.
Last year’s storms taught Florida homeowners a valuable lesson; conventional homeowners insurance is not a panacea for protecting assets. This lesson has become even more evident since some insurers are already offering less coverage in what are considered to be higher-risk regions in addition to raising premiums.
Homeowners insurance typically pays for wind, rain and hail damage. But in high risk areas, some insurers now expect homeowners to buy a separate policy for wind damage protection. Some insurers are even imposing a 1% - 5% (of the insured value of the home) hurricane deductible before conventional coverage kicks in.
In the wake of hurricane Katrina, many Gulf Coast homeowners sued insurers to get them to pay for flood related damage. They argued that water damage caused by a hurricane should be covered. Insurers countered that while homeowners policies cover certain water damage (such as rain water) they don’t cover the type of water damage caused by a storm surge.
Many homeowners would be surprised to learn that most policies don’t include flood damage protection. Most coastal residents are familiar with flood insurance, but given recent hurricane activity, even inland dwellers should consider purchasing flood insurance. The federal government offers coverage through the National Flood Insurance Program. A homeowner can find their area’s flood risk by visiting the flood insurance website at www.floodsmart.gov. Any insurance agent should also be able to provide this information.
Many homeowners are also not aware that standard homeowner’s policies pay to have their home rebuilt, they do not pay for the market value. In fact, when insuring a home, a homeowner often has a choice between a “replacement-value” policy and an “actual cash value” policy. Replacement-value insurance generally costs more because it covers the cost of both rebuilding a home up to its full insured value and replacing damaged belongings. By contrast, cash-value policies deduct any depreciation of a homeowner’s belongings, and the house, before reimbursing a homeowner.
In most cases, a homeowner can update their policy at anytime and have new coverage limits take effect immediately. This is not the case however if a major storm is headed towards a homeowners town or city. There are restrictions in place that prevent homeowners from buying policies just before a storm hits.
Flood insurance is a different matter. These policies don’t start until 30 days after purchase and there are fixed maximum benefits that can be claimed for the home structure and its contents.
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