Property Insurance Has Changed – and Often Costs More
ORLANDO, Fla. – The cost of a single home’s property insurance is based on a wide range of factors, including location, construction details and even a property insurance company’s costs. Overall, however, a number of Florida homeowners will see the cost of their coverage or their shared cost for certain repairs go up as some of those details change.
With hurricane season only three days away, many homeowners will analyze their policies to see if they need to make changes. Here are some of the things they’ll find this year, in a list compiled by the South Florida Sun Sentinel:
Roof damage: Each property insurance policy is different, but insurers are generally offering less coverage for roofs over a certain age, which can be as little as 10 years. In some cases, they’ve also changed the amount of money a homeowner can expect to collect following a hailstorm or hurricane.
“You don’t get a free roof,” Jeff Grady, president and CEO of the Florida Association of Insurance Agents, to the Sun Sentinel. “The customer has to decide whether to make that claim.”
Some policies that once included “full replacement cost” for a damaged roof have started to offer “Actual Cash Value.” The former might give a homeowner with a 12-year-old roof a completely new one if it sustains covered damage; the latter will pay the homeowner only the current market value of a 12-year-old roof. The homeowner would be forced to pick up the additional cost. Not all companies have changed to “Actual Cash Value,” and some who have allow homeowners to pay an additional premium and get the “full replacement cost” coverage.
The change, in part, is a reaction to roof repair companies that would use “whole new roof” as a default assessment since insurance companies were footing the bill. In some cases they went door-to-door enticing homeowners with promises of a free roof.
Non-weather water damage: How will a policy cover water damage? It depends many times on the source of that water. In general, only a flood insurance policy covers rising water, while a property insurance policy covers falling water, such as a damage from a strong storm.
However, coverage of water damage coming from inside the house – broken dishwasher lines that soak cabinets or water lines that soak ceilings – has changed in many policies.
“Stung by increases in such water damage claims over the past decade, most insurers now limit water damage coverage to $10,000 for homes built more than 30 years ago, while some companies offer no water damage coverage at all unless policyholders pay extra, according to the Boca Raton-based Cronin Insurance Agency,” reports the Sun Sentinel article.
Florida-owned Citizens Property Insurance Corp. caps water damage at $10,000, though that cap is lifted for homeowners willing to work with the contractors Citizens selects.
Rebuilding costs: Most U.S. homes (three out of five) don’t have enough insurance to cover their loss if a home is completely destroyed – about 20% less than needed, according to CoreLogic.
Determining the amount to insure can be tricky, but the first step is to make sure an insurer has the home’s proper details – the correct square footage, for example, number of bedrooms, flooring description, etc. An appraiser could help, and there are currently a number of software tools too.
“Ordinance of law” endorsement: Many Florida homes aren’t built to current – and more stringent – building codes. If it takes $2,000 to repair damage but $5,000 to bring the repaired part up to current building codes, a homeowner could get stuck paying the difference.
Many insurers offer an “ordinance or law” endorsement that, for more money, will cover any upgrades to current building codes – many times with a set limit to the extra amount insurance will pay, such as 25%.
Inflation Guard Coverage: Construction costs go up with inflation and demand, but property insurance policy payouts don’t rise with them unless a policy has “Inflation Guard Coverage.” A related option – Enhanced Replacement Coverage – assumes that the cost of raw materials could rise substantially following a major event, such as a hurricane. With “Enhanced Replacement Cost Coverage,” a policy offers more protection following a widespread disaster.
Flood insurance: Property policies don’t cover homeowners for flood, which is generally considered water rising up from the ground rather than rain falling from above.
While the National Flood Insurance Program was once the only viable flood insurer accepting by mortgage lenders, a number of Florida companies have started offering private coverage that may be accepted.
Windstorm coverage: For many homeowners, windstorm coverage – sometimes called hurricane coverage – is separate from their general policy but packaged together. However, the details vary, such as the deductible a homeowner will be expected to pay following major damage from a hurricane. In general, windstorm policies cost more if an owner opts for a low deductible.
Parametric insurance: A fence, shed or pool screening likely isn’t covered by a general property insurance policy, and parametric insurance picks up the gap. It can also cover the deductible a homeowner might be expected to pay for things like windstorm coverage.
Homeowners who want as much protection as possible – items not included so far – can probably find it. Some even cover things like the cost of a hurricane evacuation, including gas, food and lodging.
Source: Ron Hurtibise, South Florida Sun Sentinel