Homeowners insurance costs have skyrocketed across the country in the past year, with half of the states experiencing increases of more than 10%, according to S&P Global data. And one state is taking the lion’s share in terms of homeowners paying $4,000 or more annually. Florida had the highest percentage — 20% — of homeowners paying that annual amount for homeowners insurance in 2023, according to the Census Bureau 2023 American Community Survey, released Sept. 12.
Even more concerning for owners, rates increased a startling 43.2% in Florida between 2018 and 2023, according to S&P Global data.
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These higher rates “can make it harder for homeowners at the edge of their affordability range to meet their monthly mortgage payment obligations,” according to a recent Realtor.com report.
As Keith Griffith, Realtor.com writer and author of the report explained, home insurance premiums have risen sharply across the country in recent years as insurers faced record levels of claims from natural disasters.
In 2023, there were more billion-dollar weather and climate disasters in the U.S. than any other year on record, he added.
“Florida is on the front line for costly hurricanes and flood disasters, and home insurers there have adjusted to the elevated risk by jacking up premiums,” said Griffith. “Louisiana and coastal Texas face similar storm and flood risks, explaining the elevated premiums in those states.”
Weather Risks
A major driver of these high premiums is weather risk in the state, namely the annual threat of hurricanes, “which can be catastrophic,” said Omer Reiner, realtor and president of Florida Cash Home Buyers.
“Because of the weather risks here, a fair number of insurers have either stopped offering coverage to Floridians or didn’t get into this market to begin with,” said Reiner, adding that Florida also sees a high rate of fraud and legal issues related to insurance. “Lack of competition and lawsuits mean higher prices for everyone.”
Another startling fact: six out of the 10 most expensive cities for homeowners insurance are in Florida, “and all have average annual rates above $11,000,” according to Insurify.
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Insurance Companies Leaving the Sunshine State, Limiting Competition
In the past few years, dozens of insurance companies have either left the state or have liquidated.
In 2023 for instance, Farmers Insurance said it will no longer offer coverage in Florida — the fourth major insurer to pull out of the state so far that year — in a move that would affect thousands of residents, according to CBS News.
In addition, some insurance companies, such as AAA, also decided to limit their coverage they were previously offering to homeowners.
“We recently made the difficult decision to not renew a small percentage of higher exposure homeowner’s policies in Florida,” AAA stated in a July 2023 press release.
Rising Construction Costs and Increased in Lawsuits
Another key issue is rising construction costs, some experts noted, partly due to inflation and supply chain disruptions.
“Rebuilding homes after a disaster is more expensive now, which forces insurers to adjust their risk models and charge higher premiums,” said Dutch Mendenhall, co-founder of RADD Companies.
In addition, another driver is the challenges around insurance claims in Florida, where lawsuits and fraud have been more prevalent. This adds extra costs to insurers, further pushing up premiums for everyone, Mendenhall said.
“For homeowners, these higher insurance costs are a burden on top of already elevated home prices and interest rates,” he said.
Indeed, according to Insurance.com, Florida represents 79% of insurance lawsuits filed, compared to 21% in the rest of the country.
One potential consequence of buyers facing larger financial commitments is that it could reduce demand for homes in high-risk areas, potentially softening prices in the future, according to Mendenhall.
“Homeowners need to be strategic about mitigating risks, such as investing in flood-proofing and hurricane-resistant upgrades, to potentially lower insurance costs over time,” he added.
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This article originally appeared on GOBankingRates.com: Florida Leads the Nation in Highest Home Insurance Costs: Why 20% of Homeowners Pay $4K Annually
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