By Reid Rushing, President | Insurance Division
In Northwest Florida, we haven’t had a hurricane event since 2005. While this has been a good thing for our insurance rates, it may be a bad thing for buyers’ apathy for the proper insurance coverage. Here are a few mistakes we have seen from buyers who just want to save a little money on their insurance costs.
Mistake #1: Going Without Coverage, AKA “Bare”
If you’re lucky enough not to have a mortgage, then you’re not required by anyone to carry Homeowners insurance. Is saving premium dollars worth the risk of losing your home? Do you have enough money set aside for rebuilding the entire home? Would that money be better spent somewhere else? If there’s any hesitation when you ask yourself if you can afford to fully rebuild your home and replace all of your possessions, then buy insurance. It may be worth the peaceful sleep you’ll have when you see a hurricane on the news picking up steam in the Gulf.
Mistake #2: Removing Windstorm Coverage and Contents
Florida has a law allowing an exclusion of Windstorm & Contents coverage. While a Homeowners policy typically includes both of these coverages, homeowners may choose to send a handwritten, signed letter to their insurer asking that such coverage be excluded, acknowledging they will pay for any losses. Excluding Windstorm and Contents coverage can save you hundreds of dollars a year on insurance, but with hurricanes come strong winds.
Mistake #3: Declining or not having enough Building Ordinance or Law coverage
Homes age and building codes improve. Over the past 15 years, there have been many changes in residential building codes. That often means that there can be a big difference in the structural integrity of a newly built home versus one that is 15 or more years old. Florida now has among the strongest building codes in the United States, according to a report by the Insurance Institute for Business & Home Safety. This is a good thing, but it does mean that if a home is damaged or destroyed, rebuilding to current building codes will raise the cost of reconstruction. Building Ordinance or Law coverage pays for this additional expense.
Mistake #4: Choosing a high hurricane deductible
Florida is one of several coastal states with a percentage hurricane deductible based on a home’s insured value. As a homeowner, you have the option to select up to a 10 percent hurricane deductible on your policy. High deductibles lower the cost of insurance, but they also mean higher out-of-pocket costs after a storm. A homeowner with a house insured for $200,000 with a 10 percent hurricane deductible would have to contribute $20,000 toward rebuilding costs. Lowering the hurricane deductible to 2 percent would cut that amount to $4,000.
Mistake #5: Not Purchasing Flood Insurance
A standard Homeowners insurance policy does not cover flood damage. Everyone in Florida is in a Flood Zone, even though some may be in a more hazardous flood zone than others. We’ve seen it rain hard —and for extended periods—even during a regular storm. For this reason, every Floridian should consider purchasing a separate flood insurance policy from the National Flood Insurance Program (NFIP) or from a private insurance company. Excess flood insurance is also available from private insurance companies if more coverage is needed than the amount available from the NFIP.