As most Florida homeowners are painfully aware, although there is no Florida state income tax, the high cost of insurances can be a deal-breaker for many would-be homeowners.
In Key West, one out every three purchases is cash. However, for the other two-thirds, the mortgage lender will require the buyer to purchase insurance as one of the conditions for obtaining the loan. For most places in the country, the lender will only require Homeowner’s Insurance (also known as Fire or Hazard Insurance). However, here in the Keys, the lender will also require Flood Insurance (unless your lot is located in a X-Flood Zone) and Windstorm Insurance (sometimes called Hurricane Insurance). Over the past ten years, the costs of Flood Insurance and Windstorm Insurance has become more and more expensive every year
Flood Insurance throughout the entire country is issued and administered by the Federal Government via the National Flood Insurance Program which was created in 1968. However, there was no universal program for Windstorm Insurance. In 1992, Hurricane Andrew, the most devastating storm to ever hit the country (until Katrina in 2005) bankrupted 11 of the 30 insurance companies doing business in Florida. The remaining 19 companies raised rates so high and limited coverage that almost a million homeowners were left uninsured. In response to this void, the Florida Legislature formed the “Florida Residential Property and Casualty Joint Underwriting Association” and the “Florida Windstorm Underwriting Association” as insurers of last resort. Then in 2002, the two organizations merged forming “Citizens Property Insurance Corporation”, whose goal is to more efficiently provide insurance to home-owners in high-risk areas and others who cannot find coverage in the private insurance market.
By 2012, Citizens insured about 1.5 million properties. Feeling the program had become too large, the governor initiated a plan to downsize the program and transition some of the “lesser risk” policies back to the private market. Over the last three years, the state has transferred about 900,000 policies and currently insures about 600,000.
The goal is to get down to 450,000 policies and to do so, the state will offer almost 280,000 additional policies to the private market in October. Not all will be snapped up by the private market but enough to get Citizens down to their goal of 450,000.
The Board of Governors for Citizens will presenting a rate increase for the 450,000 remaining policies averaging 3.2% for next year. The higher risk coastal properties would see an increase of 8.6% while the lesser risk inland properties should see a slight decrease.