Florida Insurance Cancellations

[Kyle Harmon]

I have been reading a lot recently of Florida Insurance companies cancelling insurance policies, now it has happened to me. My insurance company cancelled my policy on a rental duplex with very short notice. Their reason was for the age of the roof, even though the roof is still in good condition and I have had a wind mitigation report done. I have a contract to have the roof replaced, but all the roofing companies are backed up, a lot of people in my situation are being forced to have a perfectly good roof replaced. I can’t find another company that will insure a roof over 15 years old. So in 3 days I will have no insurance, right at the beginning of hurricane season. 

Has anyone else been in this situation? Any suggestions to get insurance coverage until my re-roof is complete? 

Thank you all for the help!

[Patricia Steiner]

This is and has been an increasing problem for those of us who reside and/or invest in Florida real estate.  I do both and this year has been especially challenging. Right now, there are three insurance providers who were declared insolvent:  
Lighthouse Property Insurance Corporation, Avatar Property Insurance and St. John's Insurance Company.  Their policyholders were forced to find new insurance immediately and our home inspectors were diverted to do 4-points and wind mitigation reports to assist those stranded.  But it gets uglier:  As of May 1, seven property insurance companies in Florida are currently in liquidation due to financial losses. Several national companies have pulled out of the state, and for some still operating, their ratings are dropping — the latest is FedNat which has 152,000 policies in Florida.

Why all the pull-out and insolvency:  Roofing Fraud.  Roofers were proactively approaching property owners to replace their roofs under the premise that "it won't cost you anything - we'll make a claim through your insurance company."  And, those companies paid and paid and paid.  By the time the fraud was discovered, it was too late.  

As a result, hundreds of thousands of customers are getting dropped from their insurance policies for having older roofs and many insurers are not writing new policies.  It's a crisis.

One client of mine did find other coverage for her aged roof:  premium went from $3800 to $12,000 and she has never made a claim, has a perfect FICO, and is in a no/low crime market.  She's considered lucky...most just get cancelled. And, if you have a mortgage on your property, that results in a whole lot of bad too.  Forced placed insurance is vulgarly expensive and your loan could be called. 

Solutions:  

1.  No choice...get a new roof.  If your roof has 5 years or more life on it, get a new 4-point and wind mit - but please keep in mind that shingled roofs generally last 15 years on average if Florida (sun is a killer!).

2.  Be careful who you do business with...choose an insurer who is A rated and is not on the Florida exit list.  Your broker can help with that.

3.  Don't make a claim unless it's a catastrophic event.  Consider upping your deductibles and make sure that your insuring for the right amount (sometimes the real value is in the land which is not insurable; have the broker run a replacement calculator for your property).  Make sure your tenants are carrying Renter's Insurance with Landlord as Additionally Insured so they have coverage.

And, then sit back and remind yourself that property values in Florida are only going in one great direction as demand far exceeds any foreseeable supply - and year-over-year rent price increases are between 25% to 38% in the larger urban markets.  You made a great investment.