Orlando Harmon
Florida homeowners have been experiencing a sharp rise in insurance costs, with the state already having the highest insurance costs in the nation. The cost of homeowners' insurance in Florida is more than three-and-a-half times the national average, with some homeowners facing an extra $500 a month in insurance costs. This increase in insurance costs has been driven by a multitude of factors, including frequent hurricanes, tornadoes, wildfires, and other extreme weather events, as well as rising litigation costs and insurance scams.
| Characteristics | Values |
|---|---|
| Average annual insurance rate in Florida | $11,000 |
| Average annual insurance rate in the US | $2,377 |
| Increase in Florida's property insurance in the last 5 years | 72% |
| Increase in the number of homeowners who can't get coverage through private insurers | 400% |
| Number of new private insurers in Florida in 2025 | 8 |
| Percentage of Florida homeowners who don't have insurance | 20% |
| Number of insurance companies that exited Florida after Hurricane Ian | 30 |
| Number of insurance companies that have been approved to begin writing policies in Florida | 5 |
| Increase in average premiums by the end of 2024 | 6% |
| Increase in average premiums over the two years prior to 2024 | 20% |
| Average increase in construction materials prices across the US from pre-pandemic levels | 19% |
| Number of hurricanes that battered Florida in the last two years | 3 |
| Number of major hurricanes that hit Florida in the last four years | 4 |
| Average increase in homeowner premiums in Florida between 2019 and 2023 | 60% |
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What You'll Learn
Florida homeowners opt out of insurance
Florida's property insurance has increased by 72% in the last five years, with the number of homeowners who can't get coverage through private insurers increasing by 400%. This has led to millions of people turning to Citizens, a state-run company established in the 1990s as a "last resort" for those who can't purchase insurance policies through traditional means. However, Citizens has denied more than half of its claims in the past year and Florida insurers, private or otherwise, deny more claims than in any other state.
As a result of these rising insurance costs and claim denials, Florida homeowners are joining a rising trend of opting out of property insurance and choosing to self-insure instead. This means that homeowners have decided to forego traditional insurance policies and instead save money in an investment or savings account in case they need it. According to a national survey, about 12% of US homeowners are currently self-insuring, with Florida's rate estimated to be higher at about 15%.
Homeowners who don't have a mortgage on their properties and have their houses paid off are under no obligation to insure their homes. The Florida Association of Realtors reported that the number of homes in Florida that are owned outright is nearly 30%, higher than the national average of 28%. However, experts warn of the risks associated with self-insuring, especially in a state prone to severe weather events like hurricanes, storms, and tornadoes.
While some wealthy Florida homeowners may forgo insurance if they feel financially comfortable in the event of an emergency, experts advise that self-insuring is unrealistic and dangerous for most people. In the event of unforeseen circumstances, such as natural disasters, homeowners may not have enough accessible capital to repair or replace their homes, leading to financial devastation. Therefore, while Florida homeowners have the option to opt out of insurance, they should carefully weigh the pros and cons and consider their financial position before making a decision.
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Climate change and extreme weather events
Florida has witnessed a notable escalation in temperature levels over the past decade, with July and August 2023 setting new records for the hottest months in the state's history. This warming trend is expected to persist, with projections indicating that by 2050, individuals in Florida will endure approximately 57 to 93 extremely hot days annually. The rising temperatures contribute to a heightened likelihood of more frequent and intense extreme heat events.
The impact of climate change in Florida extends beyond rising temperatures. The state has experienced an increase in heavy rainfall events, aligning with predictions of more frequent and intense extreme precipitation as global temperatures rise. Fort Lauderdale, for instance, witnessed an extreme rainfall event in April 2023, and the state has also contended with recent hurricanes, including Ian and Nicole. These weather events have significant implications for homeowners in Florida.
The frequency and intensity of extreme weather events, including hurricanes, severe convective storms, tornadoes, and hailstorms, are key factors influencing the surge in homeowners' insurance premiums in Florida. The state's vulnerability to hurricanes and its location in "Tornado Alley" contribute to higher insurance costs. Additionally, the average insurance rate in Florida is significantly higher than in other states, with homeowners paying nearly $11,000 annually.
The combination of inflation and increased claims resulting from extreme weather events has led to substantial premium hikes in Florida. Some insurance companies have applied for rate increases of over 50%, causing financial challenges for many homeowners. The situation is further exacerbated by the departure of large insurers from the state, perceiving it as a high-risk area. As a result, an increasing number of Florida homeowners are opting to self-insure or remain uninsured, exposing themselves to potential financial risks in the event of property damage.
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Litigation costs and insurance fraud
Florida has the highest average property insurance premiums in the nation, at $4,231 per year, which is nearly triple the national average. This problem has been exacerbated by irresponsible litigation practices, such as law firms filing thousands of lawsuits based on contractor fraud schemes. Litigation abuse has been fueled by a lack of transparency and ballooning costs due to fraudulent claims, leading to large paydays for trial attorneys at the expense of insurers and policyholders.
One specific type of legal system abuse is legalized fraud, often caused by tactics such as misusing assignment of benefits (AOB) agreements. An AOB is a legal agreement that allows an insurer to pay a third party directly on behalf of the insured for services provided. For homeowners, the third party could be a contractor, repair shop, or other repair provider. While AOBs can expedite the recovery process after an incident, some third parties exploit these agreements using loopholes in the law and seize control of a policyholder's insurance claim. They may then exaggerate or falsify claims, leading to inflated claims expenses and unnecessary litigation costs that cost insurers billions annually.
In Florida, fraud and legal abuse have wreaked havoc on the insurance market. Florida accounts for 79% of all homeowners insurance lawsuits filed nationwide, while its insurers receive only 9% of all US homeowners insurance claims. Over a ten-year period, Florida insurers paid out $51 billion, with 71% of that amount going to attorneys' fees and public adjusters. The cumulative net underwriting losses for Florida's homeowners insurers totaled more than $1 billion each year in 2020 and 2021.
To address this issue, Florida legislators passed substantial property insurance reforms in December 2022 to stabilize the insurance market for homeowners and protect them from AOB fraud. These reforms include mechanisms that allow policyholders to dispute any costs they deem unfair before a claim is paid out. Additionally, further tort reform enacted in March 2023 will reduce attorney fee multipliers awarded on top of plaintiff verdicts in property claim lawsuits.
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High insurance costs force residents to leave
Florida has experienced a surge in home insurance costs, with rates rising nearly 60% between 2019 and 2023, and some homeowners facing an extra $500 a month in insurance costs. The state already has the highest insurance costs in the nation, with an average annual rate of nearly $11,000, more than three and a half times the national average. This has led to a growing trend of Florida residents opting out of property insurance altogether, with 20% of homeowners in the state choosing to self-insure and remain uninsured.
There are several factors contributing to the increase in insurance costs in Florida. One of the main reasons is the state's vulnerability to severe weather events, including hurricanes, tornadoes, and wildfires. In the past four years, Florida has been hit by four major hurricanes, which have sent insurance premiums soaring and caused some insurers to pull back on coverage or exit the state. The increasing frequency and intensity of these weather events due to climate change are expected to lead to additional rate increases in the future.
Another factor is the high litigation costs in Florida, which have been driven by a legal system that previously encouraged litigation and made it easy for plaintiffs to file lawsuits against insurers. While recent legal reforms have been implemented to address this issue, the changes are not retroactive, and litigation costs continue to impact insurance premiums.
The rising insurance costs have had a significant impact on Florida residents. Some homeowners have been forced to leave their homes or even the state due to the steep increases. Others have chosen to pay off their mortgages early and self-insure, especially those who own their homes outright and are not required to have insurance. However, this decision comes with the risk of having to bear the full cost of repairing or replacing their homes in the event of damage.
The state-backed nonprofit insurer Citizens, considered the insurer of last resort, has seen an increase in business as private insurers exit the market or raise their premiums. While Citizens provides a vital safety net for homeowners who cannot obtain coverage through traditional means, there are concerns about its ability to pay claims without levying surcharges on policyholders and assessments on non-policyholders.
While some new insurance companies have entered the Florida market, and legal reforms may help stabilize the market, it is unclear when or if homeowners will see relief from the soaring insurance costs. In the meantime, residents are left struggling to afford the high cost of protecting their homes, with many facing difficult decisions about their future in the state.
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Citizens: Florida's insurer of last resort
Florida's property insurance rates have increased by 72% in the last five years, with the number of homeowners unable to obtain coverage through private insurers rising by 400%. As a result, millions of people have turned to Citizens, a state-run and funded company established by the Legislature in the 1990s. Citizens was created to fill the gap left by private insurers who went out of business or left the state after Hurricane Andrew in 1992. Despite being intended as a "last resort", Citizens has become Florida's largest policyholder, with 1.4 million accounts as of fall 2023, reflecting the market chaos caused by Hurricane Ian.
Citizens, the state-backed nonprofit insurer, is considered Florida's insurer of last resort. It has taken on increased business as major insurance providers have reduced coverage or exited the state due to weather-related risks. Citizens aims to offload clients to the private sector, with plans to transfer up to 338,000 policies to other carriers in 2024. However, with Florida's high insurance costs and the state's vulnerability to hurricanes, Citizens may need to take on more policies if private insurers continue to pull back.
The high cost of homeowners' insurance in Florida is attributed to various factors, including hurricanes and other extreme weather events, litigation costs, and insurance scams. The state has experienced four major hurricanes in the last four years, leading to a surge in insurance premiums and reduced coverage from some providers. Florida also leads the country in insurance-related litigation, with a "legal system that invites litigation", according to Triple-I. This has resulted in increased costs for insurers, which are passed on to consumers.
Additionally, insurance scams, such as the roofing scam, have impacted rates. Unscrupulous contractors solicit unwarranted assignments of benefits (AOBs) from homeowners, perform unnecessary expensive work, and file lawsuits against insurers when claims are disputed. While recent legislation has eliminated AOBs, reducing fraudulent claims, the impact on rates has been mixed.
The rising insurance costs have led to a trend of Florida homeowners opting out of property insurance altogether. About 20% of homeowners in the state have chosen to self-insure, which can be risky in the event of damage or loss. Homeowners who have paid off their mortgages are under no obligation to insure their homes, but they may face significant financial burdens if disasters strike.
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Frequently asked questions
Yes, Florida's homeowner's insurance has increased by 72% in the last five years.
There are several reasons for the increase in homeowner's insurance in Florida. Firstly, the state has been prone to severe weather events, including hurricanes, tornadoes, and wildfires, which have led to insurers hiking premiums to cover potential claims. Secondly, there has been a rise in litigation costs due to a high number of insurance-related lawsuits in the state. Additionally, inflation and increased claims have also contributed to the increase in premiums.
The average cost of homeowner's insurance in Florida is nearly $11,000 annually, which is more than three and a half times the national average.
Yes, some Florida homeowners have opted to self-insure, especially if they own their homes outright and are not required to have insurance by a mortgage lender. However, this option comes with the risk of having to pay for any damages or repairs out of pocket. Another alternative is Citizens, a state-run and funded company that was established as a "last resort" for homeowners who cannot obtain insurance through traditional means.
Here are some strategies to reduce homeowner's insurance premiums in Florida:
- Shop around for cheaper premiums, but also pay attention to the benefits and cover differences offered.
- Install storm-resistant features such as impact windows, hurricane shutters, and wind-rated garage doors, which may qualify for discounts from some insurers.
- Look into uninsured/underinsured motorist (UM/UIM) coverage to protect against accidents involving uninsured drivers, which are more common in Florida.
