Who needs homeowners insurance in Florida? Here’s what you should know [Miami Herald]

Florida Gov. Ron DeSantis last week signed into law a property insurance bill aimed at lowering the state’s skyrocketing homeowners insurance costs and staving off a looming crisis.

But some homeowners are already “going bare” in response to big policy renewal price increases, choosing to opt out of coverage, even though experts warn that’s a big mistake.

The state has no regulations mandating homeowners to carry insurance for fire, theft, hurricanes or floods. Mortgage lenders do require homeowners’ insurance, including windstorm coverage and, for homes located in designated flood zones, separate policies to cover damage from inundation.

But people can legally go without if they buy their homes in cash or own them outright by paying off their home loans.

That doesn’t mean it’s a good idea, experts say.

“I have often said that going without homeowners insurance is penny-wise and pound-foolish,” said Robert Hartwig, an economist and formerly president of the Insurance Information Institute who’s now a finance professor at University of South Carolina. “Few people would recover in a situation where their home was totally destroyed, and could through savings or borrowing be able to fully recover.”

How many Floridians are going without property coverage?

Florida regulators don’t track how many homeowners are choosing to forgo insurance. It’s a decided minority — but more go bare in Florida than across the rest of the country. The Insurance Information Institute estimated that 13% of all homeowners in the state don’t carry property insurance, nearly double the national average of 7%.

As policy costs continue to rise, that number could go quite a bit higher, experts and officials fear.

The country has over 30 million mortgage-free homes, according to a report published last month by Bloomberg News. The report also found that Palm Beach and Broward counties have the highest concentration of mortgage-free homes compared to any other county with over 500,000 residences.

About 460,000 condos and houses are paid off out of the nearly 1.2 million residences in the two counties. The concern is that many of those mortgage-free owners — whether in South Florida or elsewhere in the state — may be increasingly choosing to skip insurance altogether.

Who is going without insurance, and what are the risks?

While rising costs affect all income levels, they hit middle-income and low-income homeowners especially hard. Homeowners’ insurance typically runs between $4,000 and $5,000 a year for a single-family home in Florida, Hartwig said. Coverage for a condo is somewhat short of that. The additional cost for flood insurance varies widely, from hundreds of dollars to several hundreds of thousands.

Often those who forgo property insurance are low-income individuals that inherit a mortgage-free, family home and choose to skip coverage, Hartwig said,

The very wealthiest can afford to go bare and rebuild if disaster strikes. But lower-income homeowners who choose to forgo insurance because they can’t afford it are also the most vulnerable to losing everything in case of fire, flood or hurricane and being unable to rebuild. Many of them live in mobile homes or older houses or condos that may have been built under older building codes or are in need of repairs, and thus more susceptible to damage, experts say.

Because insurance also protects homeowners if someone is injured on their property, those who go without coverage risk full liability if someone sues them.

Because the risk to what is usually an individual or family’s single largest asset is so great without insurance coverage, state officials and experts strongly advise against dispensing with it.

“It is important for homeowners to purchase homeowners’ insurance,” said Florida’s Insurance Consumer Advocate Tasha Carter. “The purpose is to protect your largest asset. Without homeowners insurance, someone would be required to cover all of the costs to rebuild. Often times, the costs to repair are more than what someone can afford.”

Said Hartwig: “The insurance related to the value of the home is generally small. For a few thousand dollars a year you can protect your most valuable asset.”

I own a condo. Can I do away with my insurance?

Absent a mortgage, there is no requirement for an insurance policy covering the interior or contents of a condo unit, which is the owner’s responsibility. However, the condo association will usually have a master insurance policy to cover common areas, and that cost is passed on to individual unit owners, Carter said.

How can I figure out if I can afford to go ‘bare’?

Those willing to risk going without home insurance should consider the amount they need saved up in case of an emergency, the experts say. That includes not just enough to repair or rebuild, but the cost of temporary living expenses if a home becomes uninhabitable. The typical financial advice is to have three to six months worth of living expenses saved up.

Hartwig recommended saving about $725,000 to cover living expenses, fees to clear out debris, and reconstruction. That figure is for rebuilding a single-family home at the current median sale price in the state, which the Florida Realtors trade association puts at $407,000.

I can no longer afford property insurance. What can I do, instead of going without it?

Homeowners can sometimes find savings by enlisting the help of an insurance agent or broker, though bargains in the current market, especially for windstorm insurance, which is calculated separately from basic fire and burglary coverage, don’t exist.

“Windstorm insurance is incredibly expensive,” said Thomas Nealon, an expert in property development at the University of Miami’s law school. “I got my bill and wondered if they had me confused with another McMansion in Pinecrest.”

Nealon advised obtaining multiple quotes and making sure you are taking into account the coverage and limits of each policy. Bundling different policies for homeowners and auto insurance with the same agent or company can also save some money on premiums. So can home improvements for storm and other hazard mitigation like burglar and fire alarms, hurricane-resistant windows and doors, including garage doors.

Experts also urged homeowners to take the highest deductible their insurer allows, which can save significantly on premiums. But be aware that will leave you holding the bag for damage and losses that could range well into the tens of thousands of dollars; so first be sure you can afford to cover that out of pocket.

If not, take a lower deductible. That can still save you some money while providing more coverage for losses and security.