Have you been dropped by your homeowners insurance company? Here’s what you can do [Miami Herald]

Miami Herald (FL)

If you’re a homeowner, you’ve probably scrambled to find insurance at one point. Your policy may have gotten too expensive — or you may have been dropped.

Florida has relied on a single company to certify the state’s insurers. The state’s primary ratings agency, Demotech Inc., has warned of downgrades of about two dozen insurance companies, which has left state officials tussling with the fallout.

Thomas Winkler, insurance agent at A&T Insurance Brokerage in Miami Beach, helped break down the state of homeowners insurance in Florida. Here’s what you need to know to secure homeowners insurance if you have suddenly been dropped in the middle of hurricane season.

Why are policyholders being dropped?

Smaller insurance companies are going out of business, Winkler said. Weston of Coral Gables, which has 9,400 policies in South Florida, is the latest company to go under.

Existing companies may also increase their premiums by 10% to 30%, he said. This can be because of a bad claim experience or an inspection finding an issue with the home.

Almost everyone who is dropped ends up at Citizens Property Insurance Corp., a company run by the state, he said. Citizens can’t compete with the private market by law, so rates have to be the same or higher.

“The end result is that people have incredible increases in homeowners premium, especially on old houses and especially here in Miami Beach,” Winkler said. “It’s worse than any other place.”

Why are insurance companies closing?

The issue with insurance companies in Florida dates back to Hurricane Andrew in 1992, Winkler said. Miami has a lot of claims, some of which have nothing to do with hurricanes. But policyholders hire lawyers or public adjusters to squeeze out every last penny they can.

“The companies end up spending much more in litigation than in actual paying out claims,” he said.

Smaller companies can only operate if they can reinsure most of the risks, like hurricanes, wildfires and other natural catastrophes, Winkler said. Many don’t have enough capital to cover those risks and are forced to go out of business.

What should you do if you get dropped?

If you get dropped, the first thing you should do is call your insurance agent, Winkler said. The agent will look into other insurers, but there usually isn’t any other option other than Citizens.

“That’s basically what happens in Miami,” he said. “There is basically no other choice.”

However, not every property owner is eligible for Citizens, Winkler said. In Miami-Dade and Monroe counties, the cap on replacement value is $1 million. In Broward County, it’s $700,000.

Properties that exceed those caps, he said, have more expensive insurance options.

Can you forgo insurance?

Doing nothing is an option if your mortgage is paid off, Winkler said. But if it isn’t, it’s better to act quickly.

If you’re paying a mortgage and don’t sign up for insurance, the bank may assign coverage, which is usually more expensive than a regular insurance premium. It can cost double or triple a standard rate.

Is there any way to save money on a policy?

Winkler recommends everyone get a wind mitigation inspection to see if they qualify for discounts.

He also suggests that property owners with older houses invest in protective features like shutters or hurricane windows. These measures, he said, may save up to half on the premium.