Florida homeowners turn to this insurance strategy to save money. Agents say ‘be careful.’

Stressed by rising home insurance prices?

Some insurers and agents are offering a way for clients to save substantial amounts of money off their insurance premiums, and data shows more homeowners are taking them up on it.

But experts warn that the strategy can be risky.

Sales of a form of insurance known as “dwelling/fire” is happening more and more in Florida, according to a South Florida Sun Sentinel analysis of quarterly insurance data released by the state Office of Insurance Regulation.

The increase is outpacing growth of the more traditional “all-perils” policies that most homeowners choose, the data shows.

Also known as “landlord insurance,” dwelling/fire policies are typically sold to owners of rental properties or second homes who only seek protection of the home’s basic structure from fire, hurricanes or other natural disasters. The most basic dwelling/fire policies do not include coverage for contents, water damage, loss of use, or liability in situations like dog bites or when visitors injure themselves on the insured’s property. In most cases, homeowners can add those coverages by purchasing them separately.

Dwelling/fire policies make up a small percentage of homeowner policies sold in the state. While 4,111,091 owners of single-family homes were insured by all-perils policies sold by state-regulated insurers at the end of last December, just 771,571 were insured by dwelling/fire policies, the data shows.

But since June 2022, the number of dwelling/fire policies increased by 81,684 while all-perils policies increased by 47,768, according to the data.

Insurance agents interviewed for this story acknowledged that demand for the lower-cost policies has grown as insurance costs have skyrocketed in recent years.

Some of the increase is likely a result of an increase in rental units, said Locke Burt, CEO of Ormond Beach-based Security First Insurance. Another reason is that more homeowners either cannot obtain all-perils coverage or are looking for lower prices, Burt said. Security First is among Florida-based insurers that offer dwelling/fire as an alternative to all-perils homeowner coverage.

“We’ve definitely seen more homeowners opting for (dwelling/fire) policies lately,” said Brian Murphy, owner of The Murphy Agency, a Brightway Insurance franchise in Palm Beach Gardens, “particularly for investment properties or when trying to reduce premium costs.”

Some insurers promote dwelling/fire as an option

Dwelling/fire policies cost considerably less — $2,649 on average, compared to $3,644 for a traditional all-perils policy, the data shows.

Dwelling/fire policies differ depending on the insurer, and a few companies are promoting custom-blended dwelling/fire policies to homeowners seeking affordable coverage.

They include Boca Raton-based Florida Peninsula, which began selling them in mid-2023 and reported 14,184 by the end of 2024. The company’s website stresses that while designed to provide coverage for rental homes, vacation homes and investment properties, “dwelling/fire policies are also available to those individuals living in a home which features an older roof or are looking for basic coverage at an affordable price.”

Stacey Giulianti, chief legal officer at Florida Peninsula, says insurance agents asked the company to add dwelling/fire to give them more flexibility. Sometimes because of the way companies are required to spread their risks across various parts of the state, they are prohibited from offering traditional coverage in some areas but can offer dwelling/fire coverage, he said.

Tampa-based American Integrity Insurance offers homeowners a dwelling/fire product it calls ValueGuard Property Insurance that it says “addresses the fundamental insurance needs of Florida residents, (with) coverage for essential risks such as fire and windstorm.”

The company reported increasing its dwelling/fire policy count by 24,682 between September and December of last year, the state data shows. The company did not respond to the Sun Sentinel’s requests for more information about the increase.

Features touted on American Integrity’s website include more affordable premiums, core peril coverage, and flexible coverage options.

Manatee Insurance Exchange added 32,413 dwelling/fire policies during the final quarter of 2024, but a company spokesman said the number reflects policies absorbed from an affiliate company, Safepoint, and Manatee’s participation in depopulation of state-run Citizens Property Insurance Corp. rather than any new signups or transfers of policy types.

The 81,684 increase in the number of dwelling/fire policies happened despite a decision disclosed last year by Progressive Insurance to stop selling or renewing them. Progressive’s Florida subsidiary ASI Preferred dropped 56,303 dwelling/fire policies during the analysis period.

Agents: Don’t save so much it costs you in the end

Coverage options provide homeowners with the ability to turn dwelling/fire policies into insurance that’s similar to all-perils coverage, agents say. They warn their clients to choose wisely and ensure they’re covered for whatever claims may come their way.

That’s because of a major difference in the ways that dwelling/fire policies and traditional all-perils policies are structured, Burt says.

All-perils policies package various coverages that homeowners want, and they can reduce costs by taking some of those coverages away, he said.

When considering their options, homeowners must first decide between three types of dwelling/fire coverage:

— DP-1: This is the most basic of dwelling/fire policies that provide only actual cash value — or depreciated value — coverage for damage from a few “named perils” such as fire, lightning or internal explosions.

— DP-2: Provides replacement cost or actual cash value coverage and adds additional perils, such as wind, hail, vandalism and damage from burglary.

— DP-3: Often called “open peril” coverage, these policies cover damage to the dwelling and other structures like garages and sheds, plus damage from theft and wind.

Add-on coverage is often available for screened aluminum structures, personal property theft, accidental water discharge, dog liability, computer equipment and other protections that are standard parts of many all perils policies.

In addition to saving money, homeowners often choose dwelling/fire coverage when they cannot otherwise qualify for traditional policies, Burt said. This might occur because their home or their roof is too old, their home might not meet an insurer’s minimum value requirement, or they previously have hurt their “insurance score” — which is similar to a credit score — by filing an excessive number of insurance claims.

Dwelling/fire makes sense for homeowners who can’t obtain traditional insurance but still must comply with their mortgage lender’s requirement to maintain coverage, Burt said.

A dwelling/fire policy will satisfy mortgage lenders’ requirements if it covers the outstanding loan balance amount or the replacement cost of the home, whichever is greater, says Mark Friedlander, senior director of media relations for the industry-funded Insurance Information Institute.

But just as consumers pay more at a fast-food restaurant if they order their items separately than if they order a value meal, homeowners will usually pay more if they try to build an all-perils policy by adding options to dwelling/fire coverage, agents say.

Yet, but by choosing lower coverages, homeowners increase their risk of having to reach into their pockets when it comes time to file a claim, said Brian Hodgers, president of Melbourne-based Complete Choice Insurance.

Conscientious agents will carefully explain risks to their clients, Hodgers said.

Otherwise, homeowners choosing dwelling/fire coverage solely based on its lower cost “are probably not aware they have lower coverage,” he said. “Those clients always chasing something cheap either find out the hard way, or they get lucky bouncing around from policy to policy every year getting less and less coverage. But if something does happen it puts them in a horrible spot.”

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071 or by email at [email protected].

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