Why Is Homeowners Insurance So Expensive in Florida?

Depending on which news story you read, the homeowners insurance situation in Florida right now is either “in a state of turmoil,” “on the brink of collapse” or — at the very least — in “crisis.”

Money expert Clark Howard describes it simply as “broken.”

Many Florida homeowners have either lost coverage or are facing huge increases in their premiums, as several property insurance companies there have seen their financial stability ratings downgraded, have been declared insolvent or have pulled out of the Florida market altogether.

In this article, I’ll review factors that have led to instability in the homeowners insurance market in Florida and what options are currently available for people facing these challenges.

• Why Is Homeowners Insurance So Expensive in Florida?
• Who Offers Homeowners Insurance in Florida?
• What Can You Do if You Lose or Can’t Get Coverage?
• Additional Resources and Information

This article was updated in July 2023 and I review it annually. Detailed notes on all updates can be found here.

Why Is Homeowners Insurance So Expensive in Florida?

The challenges impacting Florida’s homeowners insurance market come down to two key things, according to Clark: weather and human beings acting badly.

“You’ve got hurricanes, which we can’t control. And then we’ve got human factors in the state of Florida that have just demolished the incentive for any insurer to be there.”

The hurricane factor is simple. Because most of Florida is coastal and subtropical, the state is prone to hurricanes and other forms of severe weather. This makes the Florida homeowners insurance market risky for insurers and premiums more expensive for homeowners.

I’ve written more about how location impacts the cost of homeowners insurance here.

According to the Insurance Information Institute, Florida insurers suffered losses exceeding $2 billion between 2020 and 2021. But no major hurricanes made landfall in 2020 or 2021. Before Hurricane Ian in September 2022, the last major hurricane to make landfall in Florida was Michael in 2018.

Much of the financial loss insurance companies are experiencing in Florida is being driven by factors beyond weather. Two human factors strongly affecting the homeowners insurance market in Florida right now are fraud and litigation.

The state has been plagued for years by roofing contractors filing false damage claims on behalf of unknowing homeowners, overcharging insurance companies for materials and labor on unnecessary roof replacements, and suing companies that challenge their claims.

According to NBC News, “Insurance companies usually settle the disputed claims for many times more than the original claim. Most of that money goes to the contractors’ lawyers. … Some lawyers file hundreds of such lawsuits a year.”

The Florida Office of Insurance Regulation (OIR) reports that only 9% of all homeowners insurance claims filed in the United States are for properties in Florida, but 79% of all lawsuits against insurance companies for claims filed are in Florida.

Data also shows that lawsuits are opened for more than 27% of claims that are closed without payment in Florida. That’s eight times more than the state with the next largest amount (if you’re curious, it’s Connecticut with 3.4%). According to the Florida OIR, “a litigated claim costs approximately three times the cost of a non-litigated claim.”

If a company is paying out more than it’s earning, its financial stability rating is impacted. Third-party analysis firms such as A.M. Best and Demotech provide financial stability ratings (FSRs) on insurance companies. Being insured by a company with a downgraded FSR is risky because it means the company might not be able to pay for covered damages or loss to your property. Also, some mortgage lenders have minimum FSR rating requirements.

If your insurer gets downgraded, your lender might require you to purchase insurance with a different company, or the lender might buy a force-placed insurance policy for you. You’d be responsible for the cost of a force-placed policy, but your lender would choose the company and policy — with no guarantee that your assets are protected.

“Force-placed insurance…is really horrific insurance that is typically premiums set at ten times market rates and automatically billed to you, but for the only purpose to protect the mortgage company. This is a bad, bad, bad scenario.”

Within the last year, Demotech downgraded at least three insurance companies in Florida and the OIR declared at least six companies financially insolvent. And more recently, Farmers Insurance announced plans to discontinue offering policies in Florida while AAA said they will not be renewing policies for some of their customers.

The National Insurance Crime Bureau (NICB) has warned that bad weather leads to a rise in contractor fraud, which can increase the losses of insurance companies and lead to higher premiums. It seems — ultimately and unfortunately — Florida homeowners are paying the cost of this cycle of bad weather, insurance fraud and litigation.

Who Offers Homeowners Insurance in Florida?

With so many changes happening so quickly in Florida’s homeowners insurance market, it can be difficult to keep track of everything. When it comes to who offers homeowners insurance in Florida though, there are two types of companies to consider: government-owned or private-owned.

Citizens Property Insurance Corporation is Florida’s state-owned property insurer. According to its website, “Citizens was created by the Florida Legislature in August 2002 as a not-for-profit, tax-exempt, government entity to provide property insurance to eligible Florida property owners unable to find insurance coverage in the private market.”

In order to qualify for coverage with Citizens, you must be unable to get coverage from any other insurance company in Florida, or coverage from another company must be “more than 20 percent higher than the premiums for comparable coverage from Citizens.”

Just last year, it was noted that Citizens “has seen an increase of 399,822 policies since the beginning of 2020 and is on track to be over 1 million policies by year-end.” This highlights the impact of insurance companies raising rates or dropping out of the market.

But there are still many private companies offering homeowners insurance in Florida. The Florida OIR keeps a database of all insurance companies that are authorized and actively doing business in the state. You can use the Active Company Search — which lists more than 100 private-owned insurance companies currently operating in Florida — to get a list of active property and casualty insurers.

Still, finding a company that offers sufficient coverage at an affordable rate and without too many restrictive requirements has been a challenge for many.

State Legislation

In response to fraud, rising premiums and other challenges to secure or maintain coverage in Florida, Senate Bill 2-D was signed into law in May 2022. Some key features of Senate Bill 2-D include:

• If your roof is less than 15 years old, insurance companies cannot refuse to issue or renew a policy based on your roof’s age alone.
• If your roof is 15 years or older, insurance companies must let you get a roof inspection before requiring a roof replacement to issue or renew a policy; if it’s determined that your roof has five or more years of life then companies cannot refuse to issue or renew a policy based on your roof’s age alone.
• Insurance companies can offer separate roof deductibles at a rate of up to 2% of your dwelling coverage limit or half of your roof’s replacement cost (whichever is lower); customers who choose separate roof deductibles must be given a “premium credit or discount” on their policies.

Senate Bill 2-A was signed into law in December 2022. This bill also attempts to tackle many of the issues in the Florida insurance market through initiatives such as:

• Florida Optional Reinsurance Assistance (FORA) Program: an optional program that allows insurance companies to buy state-funded “back-up” insurance; if a company is downgraded, buying FORA protection helps them meet financial strength rating requirements. As a result, policyholders may not be forced to find new coverage if their insurer faces a downgrade.
• Prompt Pay Laws for Property Insurance: reduces the turnaround time for several key components of the claims process (ex: insurance companies must now review and acknowledge a claims communication within seven days and begin investigations within seven days; previously insurers had 14 days to complete each of these tasks)

But it seems like homeowners and insurance companies in Florida have mixed feelings about some of the changes resulting from these bills. And there’s no guarantee things will be looking up for the homeowners insurance market in Florida any time soon.

What Can You Do if You Lose or Can’t Get Coverage?

Florida residents face some of the highest rates for homeowners insurance in the nation. The ever-changing market has forced many Floridians to keep up with rising rates, go without homeowners insurance, or even sell — or consider selling — their homes.

If you’re unable to get coverage through a private company, you are eligible for coverage with Citizens Property Insurance Corporation.

The state-owned insurer offers coverage that is comparable to a standard HO-3 homeowners insurance policy. But unlike many private insurance companies, there are fixed limits for many of the included coverages. Take a look at the coverage limits below.

Coverage	Maximum
Dwelling	$700,000 ($1M for residents of Miami-Dade or Monroe Counties)
Liability	$100,000
Loss of Use	10% of dwelling
Medical Payments	$2,000
Other Structures	60% of dwelling
Personal Property	50% of dwelling

Citizens Property offers limited coverage, but it provides options when no others are available. And while the company isn’t known for the most robust coverage, it’s better to have some coverage than none at all.

Additional Resources and Information

I’ve compiled a list of resources that may be helpful.

Resource	Contact
Florida Office of Insurance Regulation (OIR) Consumer Helpline Contact the OIR to file insurance-related complaints, verify if a company is licensed to sell insurance in Florida or with other general insurance inquiries.	Toll free: 1-877-693-5236 Email: [email protected] Click here for additional contact information.
CHOICES (Florida OIR’s rate comparison tool) Use to compare rates on homeowners insurance.	Click here to access CHOICES.
Florida Market Assistance Plan (FMAP) Tool Provides free assistance finding homeowners insurance.	Click here to access FMAP.
Florida Insurance Guaranty Association (FIGA) Helps pay outstanding claims of insolvent companies; provides information on insurance companies that have become insolvent.	Click here to review recent insolvencies. Click here for FAQs on FIGA and insurance insolvencies.
Florida Chief Financial Officer | Demolish Contractor Fraud Explains contractor schemes with facts on insurance fraud and provides fraud tips, red flags and resources for consumers.	Click here to learn more about contractor fraud and access related resources.