Americans flocked to Florida for low taxes and sunshine, but an under-the-radar cost of homeownership keeps rising: insurance

Article originally posted to Business Insider.

For years, homeowner’s insurance rates have been increasing across the US. In Florida, this is especially obvious due to inflation and severe weather that makes construction costs and the cost of rebuilding and replacing a home incredibly high.

The Insurance Information Institute projected that property insurance rates in Florida could increase by at least 40% in 2023. Mark Friedlander, the Institute’s director of communications, said these increases come as Floridians are already paying more than homeowners in other states.

“Florida is a unique marketplace where you see a culmination of hurricanes and severe weather, leading to Floridians paying the highest average insurance premium in the US,” Friedlander told Insider. Friedlander said that the average Florida homeowner is paying nearly $6,000 for their property insurance, which is over triple the national average of $1,700.

Florida saw its population explode during the pandemic. From April 2020 to April 2021, almost 330,000 people moved to Florida, equal to about 903 people moving to the state each day. Besides the warm weather year-round, Florida is one of nine states with no income tax, which makes it attractive to upper-income households — especially from states including New York and New Jersey, which have top individual income-tax rates of 10.9% and 10.75%, respectively. But it’s also attractive to low-income and middle-class families who’ve said their move to Florida has to do with the affordable cost of living.

As appealing as these factors may be, the homeowner’s insurance premiums in Florida are a very real downside.

Insurance premiums are creeping up

Rick Sinkfield owned a home in Florida for five years and saw his property-insurance premiums increase substantially while there.

“I started with a premium of about $7,000, which is already high, and by the time I moved, it was $10,000 a year,” he told Insider. He said that no matter what part of Florida you live in, when there is a severe-weather event — be it a hurricane, extreme wind, or flooding — it affects everyone, and you start to see “insurance-premium creep.”

While “insurance-premium creep” is a term coined by Sinkfield, it is what most Floridians are experiencing.

“My property-insurance premium always went up,” Sinkfield said. “For it to increase from $7,000 to $10,000 over a five-year period means my premium went up by $600 a year if you do the straight math.”

As insurers leave, prices rise

In Florida, there was an estimated $60 billion in insured losses from Hurricane Ian in September 2022. The fact that many insurers have left the state has caused property-insurance rates to increase.

“Insurance-company insolvency is a real problem in Florida,” Friedlander said. Recently, United Property and Casualty Insurance Co. was the seventh private insurer to face insolvency in Florida. Of the roughly 135,000 policies with UPC, Friedlander said it’s estimated that there are still 20,000 claims left from Hurricane Ian.

Homeowners are bracing for property-insurance rates to increase by double digits for the second year in a row. In 2022, rates increased by 33% compared to the national average of 9%, Friedlander said.

“How many Floridians are living paycheck-to-paycheck or feeling financially maxed out?” Friedlander asked. “They cannot afford to bear these mass increases every year.”

How to get more affordable homeowner’s insurance in Florida

At this rate, Friedlander said the rapidly rising cost of property insurance will make it impossible for some Floridians to maintain their homes. The Insurance Information Institute, as well as Florida legislators, are urging Floridians not to reduce or drop their coverage.

To reduce the cost of premiums, Friedlander advised homeowners to take the following steps:

1. Shop around for the best rates

“Get several quotes to make sure you are getting the best pricing and to get as close to what you can afford as possible,” Friedlander said. Comparison shop as much as you can. It’s a good idea to get several quotes from a few different insurance companies to make sure that the coverage is the same. Compare your homeowner’s insurance quotes, looking for the policy with the best types of coverage, the highest limits, and the deductible that best fits your budget.

2. Bundle your insurance

Purchasing your home and auto insurance from the same company can provide savings of up to 25%, according to Friedlander. Bundling insurance policies can also simplify your bill-paying and recordkeeping.

3. Increase your insurance deductible

Increasing your homeowner’s insurance deductible generally will lower your insurance premiums. “In Florida, you might have a standard deductible and a hurricane deductible, so if you increase the deductibles on both, you could get your premium way down. Of course, with the understanding that if you have to make a claim, you will be paying more out of pocket,” Friedlander said.

4. Research discounts

“There are discounts that can be applied if you qualify, and it’s worth it to check out those options because they can save you real money,” Friedlander said. Were you in the military or a member of an alumni association or employment association that offers insurance discounts? It may be worth looking into these memberships to see what kind of discounts they could provide.

There are also policy-related discounts such as “loyalty discounts” — some insurers reward customers that have had policies with them for several years. A “claim-free discount” is a discount given to customers that have not made an insurance claim for a period of time.