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South Florida and Treasure Coast homeowners are seeing their premium rates increase by 20 percent or more. In some cases, rates have doubled.
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AM Best’s composite of Florida property insurance companies hit five-year performance and surplus lows in 2020, and given persisting and significant market hurdles, companies will find sustaining current surplus levels a challenge, according to a new commentary from the ratings firm.
In its Best’s Commentary, “Florida’s Difficult Market Continues to Challenge Insurers,” AM Best states that despite no hurricanes making landfall in 2019-2020, Florida property insurance writers still posted a combined ratio of 131.5 in 2020, an 18.2 percentage-point deterioration from 2019. Both years reported greater volatility compared to 2017-2018 due to social inflation pressures, which has increased the severity of claims and litigation costs; more-frequent severe convective storms; and an increase in roof replacements, Best said.
Insurers have requested material rate increases, often in the double digits, to offset elevated pressure on profitability, and have revised their risk appetite for select pockets of Florida business.
“However, rate increases have not kept pace, leading to declines in underwriting profitability,” the commentary states.
Over the last five years, the mounting pressures also have led to a 9.7% decline in surplus, with aggregate losses reported each year. These actions have led to an increase of in-force policies at Florida’s residual insurer, Citizens Property Insurance Corp. Beginning in 2019 through the first quarter of 2021, Citizen’s personal residential policies in force increased by 29.3%.
In addition, the reinsurance market has hardened, resulting in higher costs for reinsurance protection. Expectations for a more-active storm season also may influence reinsurance purchase decisions. Hurricanes over the last five years have largely been considered earnings events, given that reinsurance programs acted as intended, limiting the impact to the balance sheet.
However, given the added challenges, pressure has started reaching past operating performance and eroding balance sheet strength. Primary insurers are nearing the close of the midyear reinsurance renewal season, which will provide insights to specific shifts in price and its impact.
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If you’re considering purchasing homeowners insurance, it’s important to understand what your policy will cover. Each homeowners insurance policy will look slightly different depending on the coverage you choose, the add-ons you include in your plan, and where you live. However, most policies will cover your home’s structure, personal property, living expenses if you’re displaced from your home and liability protection if there’s an accident in your home.
Dwelling coverage, also known as coverage A, covers the cost of completely rebuilding the structure of your home. While it doesn’t include coverage for your personal belongings, it does cover your home’s structure, foundation and appliances if get damaged from a covered peril, such as a tornado or hail. Note: Your appliances will not be covered if they break due to misuse or negligence.
While there’s no one-size-fits-all number or percentage for dwelling coverage, consider purchasing enough coverage to completely rebuild your home. Speaking with an appraiser can help you get a more accurate estimate of how much dwelling coverage your home requires.
2. Other structures coverage
Other structures coverage, also known as coverage B, will insure structures on your property that are detached from your main home, such as a tool shed, gazebo, pool house or fence. In general, other structures coverage is usually around 10% of your dwelling coverage.
3. Personal property coverage
This form of coverage, also known as coverage C, will protect your personal belongings if they’re damaged by a covered peril. Additionally, personal property coverage can insure your belongings that are kept outside of your home and protect you from credit card fraud.
For luxury items, such as jewelry or furs, there may be a limit to your personal property coverage and you may have to purchase additional protection, but this will ultimately depend on your home insurance provider. In general, personal property coverage starts at 50% of your dwelling coverage. Taking inventory of your personal belongings before signing up for a home insurance policy is a great way to determine how much coverage is needed.
4. Loss of use/additional living expenses coverage
Loss of use coverage, also referred to as coverage D, will pay for any expenses you might incur if you’re displaced from your home after a covered peril. For example, this coverage can cover the cost of temporary lodging in a hotel room or meals when you don’t have access to a kitchen. Your additional living expenses coverage will typically be around 20% of your dwelling coverage.
5. Liability coverage
This coverage will pay for medical bills if someone is injured in your home and repairs if someone’s property is destroyed in your home. Liability coverage can also cover any legal fees if you’re sued. This coverage starts as low as $100,000, but other coverage amounts are available.
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6. Medical payments to others coverage
If someone is injured in your home and it’s not your fault, this coverage will cover their medical bills. In general, this protection is usually offered at $1,000 per person, but you can typically choose higher coverage amounts.
Additional homeowner insurance coverages
Most home insurance providers offer additional coverage on top of the standard coverage they provide. This additional coverage is often referred to as a rider or an endorsement. Here are a few common additional coverage options.
Extra coverage and extensions of coverage
For most coverage categories, you can increase coverage for an extra fee without increasing the insurance on your entire home. For example, if your personal belongings coverage is 50% of your dwelling coverage, you can often increase this percentage without increasing your dwelling coverage. Additionally, items such as jewelry, furs and firearms have coverage limits, but you can often purchase additional coverage to cover losses on these items.
Earthquake and flood coverage
Earthquakes and flooding are two natural disasters that are usually not covered by a standard home insurance policy. However, most insurance companies offer this type of coverage as an add-on. If you live in an area that’s susceptible to either of these perils, we recommend reaching out to your provider for more details.
Identity theft protection
If your identity is stolen, having identity theft protection can help pay for legal fees and other expenses related to restoring your identity.
Hurricane coverage
If you live in an area with a high hurricane risk, such as Florida, Texas or along the Gulf Coast, you may have hurricane protection built into your plan in the form of a separate hurricane deductible, which often ranges from 1%–5% of your dwelling coverage. However, most homeowners insurance policies don’t include protection from flooding due to hurricanes, so you’ll likely need to purchase flood insurance separately if you live in an at-risk area.
Note: This isn’t a universal list of endorsements and these options will not necessarily be offered by every provider in the home insurance industry. Check with your provider for more details.
What does homeowners insurance not cover?
Homeowners insurance often excludes earthquake and flood-related damage, but there are several other instances of damage that your home insurance will likely not cover. Here are a few examples:
Failure to perform maintenance
If your home suffers damage from preventable causes, your insurer won’t cover the cost of repairs because the damage could have been prevented. For example, a burst pipe due to freezing won’t be fully covered, since steps could have been taken to prevent the pipe from freezing.
Pests
Pest infestations are another example of an issue that home insurance companies won’t pay to fix. Most home insurance companies will consider pests preventable, since homeowners can take steps to prevent an outbreak.
Routine wear and tear
Even if you maintain your appliances and home systems well, you may still experience breakdowns due to routine wear and tear. These breakdowns aren’t covered by home insurance.
If your systems and appliances do break down due to normal wear and tear, consider a home warranty policy. Items such as your dishwasher, HVAC unit, refrigerator and laundry machines are vital to keeping your home running smoothly — a home warranty can secure these items and keep you from paying thousands of dollars in repairs. But they’re not always worth the cost.
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If you own an income property, you’re probably well aware that having the right homeowners insurance policy in place is key. Without proper coverage, you could wind up responsible for costly damage in the event of a weather-related incident.
In fact, as this year’s hurricane season kicks off, now’s a really good time to review your homeowners insurance policy and make sure you’re satisfied with your level of coverage. In recent years, storms have grown increasingly intense, and even if you don’t happen to live in a known hurricane zone, you never know when a major storm might pay a less-frequented city a visit (just think about Hurricane Sandy, which battered parts of the country that normally don’t have hurricanes on their radar in 2012).
In 2020, between storms and wildfires, there were 22 separate billion-dollar weather- and climate-related disasters, according to the National Oceanic and Atmospheric Administration. There also were 30 named Atlantic storms, which is a seasonal record, and 12 of those wound up making landfall in the U.S.
But while reviewing your homeowners coverage ahead of hurricane season is always a good idea, this year, it’s even more important than usual. Here’s why.
Homeowners insurance policies include replacement cost provisions, but some policies are capped at a certain level. And that could prove problematic if your home sustains damage and it now costs more to fix it.
Lumber prices are already up 67% this year and a whopping 340% from just a year ago. As such, the cost of repairing or replacing your home may be much higher than you’d normally expect, and so now’s the time to make sure your insurance policy offers enough coverage in light of that. The last thing you want is to see your property sustain weather damage only to have your insurance policy fall short, leaving you on the hook for the difference.https://fc5a88d2ecf77630a4aa5104ac89d080.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
Don’t forget flood insurance
In addition to checking on your level of coverage for your homeowners policy, you may want to take the opportunity to reassess your flood risk. It’s estimated that 25% of flood insurance claims come from outside of what’s considered a high-risk zone, so if you’ve held off on flood insurance due to the cost involved, now’s the time to reconsider — before those harsh summer storms really kick into gear.
When you own an income property, there are different costs to bear, and insurance is only one of many. But it’s also an expense you shouldn’t skimp on. Doing so could prove disastrous if a weather event strikes, so take the time to assess your coverage now — before it’s too late.
Home insurance canceled or not renewed? Beware of force-placed coverage
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Has your home insurance company notified you that your policy is being canceled or won’t be renewed?
If so, you should quickly secure a new policy if you are still making mortgage payments on your home.
It’s called force-placed insurance, and your mortgage contract gives your lender the right to protect its interest by putting one on your property if you let your policy lapse.
It’s expensive — as much as two to 10 times as costly as normal insurance. You will be required to pay the inflated premiums, increasing your monthly mortgage payment.
You might lose the right to sue over claims disputes.
And it won’t cover your personal property or medical care for others who get injured on your property.
Consumer advocates fear that Florida’s insurance crisis and the expiration of federal moratoriums on foreclosures will lead to an increase in force-placed insurance, which is also known as creditor-placed or lender-placed insurance.
“I expect an explosion in force-placed policies as [pandemic-related] protections subside,” said Birny Birnbaum, a former Texas insurance regulator and current director of the Texas-based Center for Economic Justice, an advocacy and education organization representing low-income and minority consumers on issues involving insurance, utilities and credit.
Andrew Pizor, attorney with the National Consumer Law Center, said he expects force-placed policies to increase as Florida’s insurance crisis worsens.
Ryan Papy, president of Palmetto Bay-based Keyes Insurance, said that while his agency hasn’t yet noticed issues with force-placed policies among potential clients, increases in policy cancellations over the past few months could spur “a higher frequency in the future.”
Florida has highest share of force-placed insurance
Florida already leads the nation in spending on force-placed insurance, according to data reported to the National Association of Insurance Commissioners.
Florida borrowers were charged $795 million of a total $3.3 billion in premiums nationwide for force-placed coverage against flood, wind and all other perils, the data shows. The state’s 24.1% share of the force-placed insurance market is down from 35% in 2009-11, the worst years of the housing bust that triggered the Great Recession.
That era was marked by abuses by home loan servicers and insurers that triggered class action lawsuits, multimillion-dollar settlements and federal protections for borrowers of loans backed by Fannie Mae and Freddie Mac.
Servicers and insurers were accused of working together to reap windfall profits on policies placed on troubled properties.
Regulators found that insurers were paying lucrative commissions or other incentives to loan servicers that purchase force-placed policies. Loan servicers were accused of force-placing insurance on properties without giving borrowers adequate warning.
Insurers were accused of issuing policies on properties serviced by affiliated companies, and providing reinsurance for properties insured by companies owned by loan servicers.
And insurers were discovered providing kickbacks to loan servicers in the form of free or below-cost administrative services, including monitoring borrower databases to identify which ones stopped carrying their own insurance and were thus eligible for forced-placed coverage — a service called insurance tracking.
“In some cases, mortgage servicers were getting close to 50% of premiums kicked back in the form of commissions, reinsurance and free or below-cost services,” Birnbaum said.
In 2014, Wells Fargo and two lender-placed insurers, Assurant Inc. and QBE, agreed to repay affected customers up to 11% of their premiums to settle a class action lawsuit filed in Miami. Bank of America settled a similar case that year for $228 million, while settlements were reached in cases against J.P. Morgan Chase & Co. and Citigroup Inc.
In arguing for increased protections, Birnbaum cites data showing that the top seven force-based insurers in Florida reported a combined loss ratio of 34.2% in 2020. That means that for every $100 in premium paid by borrowers, the insurers had to spend only $34.20 on claims, leaving them awash in cash.
Traditional insurers in Florida have been reporting far higher loss ratios — 68.5% in 2019, according to ratings agency A.M. Best.
Loopholes still hurt consumers
State and federal-level reforms, including in Florida, barred insurers from paying commissions to loan servicers but did not prohibit them from providing insurance tracking and other free and below-cost services, Birnbaum said. In fact, because the cost of the tracking is recouped from premiums paid by borrowers, consumers with force-placed coverage are essentially paying for tracking of all insurance customers, he said.
Florida also allows loan servicers to force-place coverage that names only the lender as the policy beneficiary. That left Ethel Reconco unable to sue Integon National Insurance Co., which was force-placed by her lender, for a claim related to Hurricane Irma in 2017. In January, the 4th District Court of Appeal ruled that the Fort Pierce woman had no standing to sue because she was not a named insured on the policy.
Currently fewer than 10% of Florida policies don’t name the borrower as a named insured along with the lender, but Birnbaum says even that percentage is unacceptable.
Federal reforms have offered consumers some protections, including requiring loan servicers to continue making payments for traditional insurance if the borrower has an escrow account and cannot afford to make the insurance payments. That requirement, however, does not cover borrowers whose policies are canceled or not renewed.
Loan servicers are also barred from force-placing insurance without a reasonable basis to believe that the borrower failed to maintain insurance coverage as required in the loan documents.
Servicers must send two notices before purchasing a force-based policy. The first must be sent at least 45 days before purchasing the force-placed policy. The second must be sent no earlier than 30 days after the first notice and at least 15 days before charging the borrower for the force-placed insurance. This notice must include the cost or a reasonable estimate.
If a borrower with force-placed coverage provides proof that a traditional policy has been purchased for the property, the servicer is required to cancel the force-placed insurance within 15 days of receiving the evidence and refund any premiums charged while both policies were in place.
Loan servicers don’t always comply with that requirement, according to a lawsuit filed May 7 by Kimn S. Sullivan, a Palm Beach Gardens homeowner who has been trying to persuade Bank of America to remove a flood insurance policy placed on her home since 2009. In her suit, Sullivan, who lives in an area at high risk for flooding, says her mortgage loan contract exempts her from having to buy an individual flood insurance policy if her house is covered by a master policy purchased by her homeowner association.
But Bank of America won’t recognize the contract provision and has added more than $21,000 to the balance of her loan to recoup the force-placed policy cost, her suit states. A Bank of America spokesman said the company had no comment on the lawsuit at this time.
Low-income borrowers are most vulnerable
Most Florida home loan borrowers facing cancellation or nonrenewal understand the risk of failing to maintain insurance coverage, Papy says.
“Typically, the cancellation letters are drafted in an alarming way to push the insured to find other coverages,” he said by email. “In most cases the cancellations provide significant notice and the insureds are aware that not having coverage will lead them down the path to force-placed coverage.”
Paul Handerhan, president of the consumer-focused Federal Association for Insurance Reform, said he expects rising costs of traditional insurance will trap vulnerable homeowners, such as low-income borrowers, people who speak English as a second language or those who don’t understand the difference between traditional and force-placed coverage.
If their escrow account doesn’t have enough money to cover a sudden insurance rate increase, their lender will ask them to come up with a lump sum to cover the shortfall. If they can’t afford the lump sum, their policy won’t be renewed and their loan servicer could then force-place a more expensive policy. That could make their new mortgage payment unaffordable, triggering foreclosure and possible loss of their home, he said.
Others will struggle to make their payments not knowing they are paying more than they should for insurance that doesn’t cover as much and doesn’t name them as a beneficiary of the policy. “And they won’t know that until it comes time to file a claim,” he said.
Ron Hurtibise covers consumer issues, insurance, travel and many other business matters. He can be reached at rhurtibise@sun-sentinel.com or 954-356-4071
Your homeowners insurance protects you from financial devastation should your home be damaged or destroyed. Finding out that your homeowners insurance is canceled may be stressful and frightening.
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A homeowners insurance lapse may be the simplest type of issue to fix if you handle it quickly. A policy typically lapses if you failed to make your insurance payments. Having a coverage lapse could put you at risk of having no insurance if your home is broken into or disaster strikes.
Most home insurance companies offer you a grace period in which you can make your payment to reinstate your coverage. If you are responsible for making your payment, paying your premium right away is the fastest way to resolve a lapse issue, as long as you are still within the grace period. If your mortgage company pays your insurance from an escrow account, you may need to call your mortgage lender and request that they release the payment immediately.
Nonrenewals
A nonrenewal letter notifies you that your policy will not renew automatically when your coverage period ends. Nonrenewals can be initiated by you or your carrier. You may decide to initiate a nonrenewal if you have gotten quotes from other companies and decided to switch insurance carriers at your renewal date. Your insurance company may decide to not renew your policy for several reasons, including your claims history and the condition of your home. If you no longer fit into the company’s underwriting profile for any number of reasons, your policy may be nonrenewed.
In other cases, your insurance carrier may no longer operate in your area or might withdraw coverage after a series of costly claim scenarios such as a major flood or other natural disasters. Regardless of the reason, insurance companies are required to notify you in writing if they decide not to renew your homeowners insurance. Most states require companies to give you at least 30 days advance notice, to give you enough time to shop around and find an alternative.
Cancellations
As with nonrenewals, both you or your insurance company may initiate a cancellation. Cancellations differ from nonrenewals in that the last day of coverage does not line up with your policy’s renewal date. For example, if your homeowners insurance policy starts and ends on January 1 every year, a nonrenewal notice will only ever cancel your policy on January 1. A cancellation notice can stop coverage anywhere within the policy term.
Insurance companies may choose to cancel your policy for a number of reasons. If you misrepresented yourself or omitted information during the application process, for example, your policy may be canceled, even if you have only recently purchased your home and policy.
One of the most common reasons that insurance companies cancel home insurance policies is related to inspections. Insurance companies generally do exterior inspections of homes when new policies are written, and on occasion after that. For example, if your roof is in poor condition, your home has structural issues or your company discovers that you own an ineligible dog breed, you may receive a cancellation notice requiring you to correct the issues or risk your policy being canceled altogether.
Insurance companies are required by state laws to send you a written notice of cancellation. Typically, companies must give you at least 30 days of notice. This gives you time to discuss the cancellation with your carrier, correct any concerns so that the company will continue coverage or find a new home insurance company.
You can also initiate a home insurance cancellation. Perhaps you found a cheaper company or you have sold your home. You can call your carrier to request that your policy be canceled on a certain date. You may need to sign a cancellation form to confirm your request.
What to do if your homeowners insurance is canceled
Depending on the type of notice you receive, there are steps you can take to remedy the problem. If you receive a homeowners insurance lapse letter, contact your insurance carrier right away and make your past-due payments. Once you have reinstated your policy, you may also need to let your mortgage company know, since home insurance is required by mortgage lenders. Your lender may purchase a new home insurance policy on your behalf and expect you to pay for it, even if it is far more expensive than your current lapsed policy and does not include any coverage for your personal property. It is important to let your lender know if your coverage has been reinstated, so that it can remove this force-placed coverage. If you receive a lapse letter and your insurance is paid through an escrow account, you may want to contact your mortgage carrier and ask them to send the payment to your insurance company.
If you receive a nonrenewal notice, your first step is to find out why your policy is being terminated. The letter you receive will likely include an explanation or you could call your carrier to get more information. Depending on the situation, you may be able to make changes to your home or policy that will satisfy the insurance company and convince them to keep your coverage.
Similarly to a nonrenewal, if you receive a cancellation notice, talking to your insurance company is a good first step. If your homeowners insurance was canceled after an inspection, you may be able to make the necessary changes to your home, like repairing a deteriorated roof. This could be enough for the company to rescind the cancellation and keep your coverage.
If you are not able to convince your insurance company to keep your policy, it may be harder to find coverage, especially if you have numerous claims or your home is in poor condition. If you are having trouble finding affordable home insurance after a cancellation, check with your state’s insurance commissioner. They may provide a list of carriers who are tasked with providing coverage for harder-to-insure homeowners.
Frequently asked questions
Why is my homeowners insurance being canceled?
There are many reasons why your home insurance could be canceled. You will typically receive a letter with an explanation, giving you a specified amount of time before your coverage ends. Your coverage may have lapsed for nonpayment, your insurance company may decide not to renew your policy due to claims or your company may have discovered issues during your inspection, among other reasons.
Can I contest a home insurance cancellation?
You may be able to contest a cancellation, depending on the situation. If you have an agent, they may be able to work directly with an underwriter to come to a compromise, or you could call your company directly. If you have filed numerous claims, for example, you may be asked to increase your deductible or remove a certain coverage in exchange for the company keeping your policy. However, it may be a good idea to get quotes from other companies as a backup, so that you are not left scrambling to find coverage in a short period of time if your negotiations fail.
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State approval of the policy terminations came at the request of three insurers — Gulfstream Property and Casualty, Universal Insurance Company of North of America and Southern Fidelity Insurance — that argued that honoring the contracts would put them at risk of insolvency, according to consent decrees issued earlier this month by the Florida Office of Insurance Regulation. javascript:void(0)PauseAd 00:06 – up next “Experts forecast abnormally active hurricane season”Loaded: 100.00%Unmute0Experts forecast abnormally active hurricane season
“It’s a reaction to the underwriting losses that have been ongoing for the past five years,” said Paul Handerhan, president of the Federal Association for Insurance Reform, a national trade association.
Multiple factors are at play, including the increased frequency and severity of catastrophic weather events, the rising costs of litigation, and insurers’ own reinsurance costs to guard against major losses, Handerhan explained.
“From the consumers’ perspective, the outlook is not great. They’ll have less choice at a higher rate,” he said.
“Vulnerable populations”
The limited options for homeowners are likely to get worse as insurers across Florida reevaluate their business and underwriting criteria, which has gotten more restrictive, according to Handerhan. “If your house is more than 40 years old and hasn’t been brought up to code, there’s a high probability you’re not going to get renewed,” he said.
“The unfortunate truth is that a lot of these homes that are older involve vulnerable populations such as the elderly and those on fixed incomes” without the means to repair or upgrade properties, he added.
As their coverage is withdrawn, many affected homeowners may instead turn to Florida’s Citizens Property Insurance Corp., a state-run entity that limits personal liability coverage and imposes surcharges on all policyholders if claims are too high following a catastrophe.
Citizens has been adding thousands of customers a week, and was approaching 600,000 policies at the end of April, as private insurers shed customers and sought large rate increases. That could put taxpayers on the hook for losses, according to Handerhan.
The effort to unload policies viewed as potential liabilities by insurers comes less than two weeks before the start of hurricane season, which begins June 1 in Florida and typically lasts five months. Tropical Storm Eta hit the state in November, causing wind damage and flooding up and down Florida’s west coast. In 2017, Hurricane Irma caused an estimated $50 billion in property damage in Florida.
“Florida has one of the highest catastrophic risks, definitely, in the country, but also the world,” said Handerhan, describing the state as a “hurricane-prone peninsula that sticks out into the Atlantic Ocean.”
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After financial advisor Sarah Carlson fell victim to a violent hit-and-run driver, she became a long-distance triathlete — and a vivid example of why disability insurance is so important for clients.
Carlson’s individual disability policy, combined with her Social Security benefits and a state victims’ fund, enabled her to avoid suffering a financial loss that could have worsened the impact of the brutal crash 18 years ago, the Fulcrum Financial Group founder told attendees this week at a webinar sponsored by Secura Consultants and the Council for Disability Awareness.
The details of insurance policy provisions can make a crucial difference to clients in the event of a crime, accident, medical illness or other unforeseen crisis, Carlson and two other advisors agreed.Operationalizing financial wellnessFinancial advisors are expected to offer more holistic advice to clients today. To do so, some are setting up to offer expanded advice while relying more…SPONSOR CONTENT FROM SERVICENOW
The chances of a policy being triggered aren’t small: an employee who turned 20 last year has a 25% chance of becoming disabled before their normal retirement age, according to the Social Security Administration’s latest insured worker data. That probability has only ticked down 1.5 percentage points in the past decade. Since 60% of U.S. civilian workers have no disability insurance, per the Bureau of Labor Statistics, many Americans are a crisis away from ruin.
“People really fear death, but we also have a Superman complex,” said panelist Lauren Zangardi Haynes of Richmond, Virginia-based Spark Financial Advisors. “Sometimes we think, ‘Oh, that won’t happen to me.’”
Haynes’ team reviews every area of clients’ insurance coverage, including home, auto, life, disability, health and various types relating to business owners, she said. In addition, Carlson pointed out, advisors should make sure clients understand the “opportunities and limitations” of each disability policy, such as the price, whether mental health services are included, possible catastrophic coverage and if they’re integrated with state and federal programs like Social Security.
In 2003, Carlson was in New York for a due diligence meeting when the now-incarcerated driver of a stolen SUV slammed into her, ripping off a section of one of her legs and shattering her pelvis. Although she had a “beefed-up emergency fund that went through so fast,” Carlson went “from being able to provide for my family to not being able to do anything,” she said. The Spokane, Washington-based advisor endured 12 surgeries before ultimately participating in Ironman Triathlons. Some doctors had warned her she would never be able to walk again.
“It was about three years of being totally disabled,” Carlson said. “Disability [insurance] helped me keep my house, helped me not go bankrupt. And, as a result, I put four kids through college, I have a thriving business and I’m glad I didn’t have to make some tough decisions.”
In a Secura Consultants and Council for Disability Awareness webinar, three financial advisors discussed why disability insurance is often misunderstood and how to help clients find the right policy for them.
The prospect of having to make such a difficult choice looms for a much larger share of the workforce than most people realize, according to Carol Harnett, president of the Council for Disability Awareness, an industry-funded nonprofit. A little more than a third of employees have long-term disability coverage and 40% have short-term policies, Harnett noted.
“We still aren’t even at 50% of people who have that kind of coverage available to them,” she said. “And then if they access it, of course, and they don’t pay any of the premium, it’s completely taxable.”
Harnett added that with workers changing jobs “more rapidly” these days, the policies aren’t portable if they leave their current employer.
In the case of death caused by a catastrophic event, life insurance provided by employers will help, but the amount of, say, the equivalent of 10 years worth of income from a clients’ salary “far exceeds any kind of life insurance,” according to Kath Derisson of Omaha, Nebraska-based Fyvie Financial. The income protection of disability policies makes them more important for many clients, she argues.
“It’s painful; it’s not paying just a few bills here and there, it’s paying to sustain you,” Derisson said. “There’s no magic tree that provides you with money every day. That would be great if we did have one, but, realistically, we are our biggest asset. And I always always say that to my clients, ‘You are your biggest financial asset. You’re the one who earns that income. Without that income, you don’t have any savings accounts. You don’t have any investments over time.’ So a really key point to drill home is the importance of that.”Tobias Salinger Senior Editor, Financial Planning
Please call Lee from USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com
If your property insurer happens to be Universal Insurance Company of North America, check your mailbox: You may have a cancellation letter waiting there for you.
Universal is one of three Florida-based insurance companies that are canceling or not renewing more than 53,000 property policies as of June, just before the 2021 hurricane season begins. The other two carriers shedding customers before stormy weather arrives are Southern Fidelity Insurance Company and Gulfstream Property and Casualty Insurance Company, neither of which insures homes in South Florida.
In its filing to the Florida Office of Insurance Regulation dated May 6, Universal states it is canceling 13,294 policies out of its total 57,000 Florida policies due to yearly losses of $4.1 million in 2019 and $22.5 million in 2020. The company also insures homes in 12 other states.
Florida statute Chapter 224 Part III allows insurers to cancel policies when the company would be placed in a hazardous financial situation due to an uptick in claims after hurricane damage or attorney’s fees to defend itself over fraudulent adjuster claims.
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The company is planning to merge with the Texas-based Universal North America Insurance Company, which reported a surplus of $61,525,164 as of December 2020.
Neither Southern Fidelity nor Gulfstream write policies in South Florida..
Dulce Suarez-Resnick, past president of the Latin American Association of Insurance Agencies, said this kind of widespread cancellation is common after subsequent years of heightened hurricane activity.
“It’s not the end of the world or that they’re bad companies,” Suarez-Resnick said. “It’s that these companies were weakened by prior storms and the bill for the reinsurance [financial protection used to limit a company’s financial exposure] got heftier. That’s where we are today.”
Although the state emerged unscathed in 2020, the most active hurricane season on record, insurers are still reeling from the devastating impact of Hurricane Matthew in 2018 and Hurricane Irma in 2017.
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Despite these most recent cancellations, other insurers have been returning to South Florida after the mass exodus post-Andrew. Allstate Insurance, for example, is using a subsidiary (known in the industry as “pup companies”) to write condo policies in South Florida again. Other companies such as Geico and AAA are writing condo insurance if customers buy a bundle that includes their auto insurance.
All three Florida insurers cite the same reason for the cancellations. Southern Fidelity, which insures homes north of Orlando, is not renewing 19,600 homeowner policies over the next 14 months in order to avoid a “hazardous financial condition,” according to its filing. Gulfstream, which operates throughout the state except for Miami-Dade, Broward, Palm Beach and Monroe counties, is nixing 20,311 out of its 56,000 Florida policies, citing the threat of a deteriorating financial condition that would reach “an unsustainable level by mid-2021.”
The culprit for the companies’ losses is fraud, said Suarez-Resnick. False claims, such as a roof leak discovered before the year-long deadline on hurricane damage claims has passed; inflated public adjuster charges and attorneys’ fees cost the companies far more than their budgets allowed.
Property insurance rates have risen continually over the past few years. In 2019, the state Legislature passed reforms designed to discourage rate increases by limiting a practice called “assignment of benefits,” in which a homeowner could sign their rights to repair claims over to repair contractors, who had an inherent interest in boosting the tab.
Earlier this month, Florida lawmakers passed a bill limiting legal fees and the period in which a property-damage lawsuit can be filed, and allowing state-backed Citizens Property Insurance Corp. to raise its rates annually by as much as 15%, while other private insurers in the state have boosted rates by 20%. But some consumer advocates claim the insurance industry crisis has been manufactured by the industry.
Owners of canceled homeowner’s insurance policies should quickly shop other carriers, say advocates.
Some may have to turn to Citizens. That company’s exposure is projected to rise as more insurance carriers drop out of the state. As of February 2021, Citizens holds 630,000 homeowner policies — up from 542,000 in Dec. 2020. By the end of 2021, the number is expected to hit 700,000.
That’s still less than half of the 1.5 million policies the company carried in 2012, when then-Gov. Rick Scott pushed to “depopulate” Citizens by seeding seven companies with partial funding to take over nearly 300,000 private homeowner and commercial insurance policies.
Of those seven companies, only three are still open, and only one — Olympus Insurance — remains active in South Florida, but only insuring homes built on or after 2010.
“The reinsurance issue will continue for another two years, unless we get hit by another cycle of hurricanes,” Suarez-Resnick said. “What matters most now is figuring out how to reduce fraud, because we will never be able to get rid of it completely. But the real estate market is booming, and if we didn’t have a backstop mechanism in place like Citizens, you couldn’t have home sales. It would kill real estate.”
Please call Lee from USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com
Water damage can happen when you least expect it—and depending on the source, it can be expensive to fix.
There are lots of issues that can lead to water damage in your home. There are the obvious ones, like severe weather, floods, and burst pipes. But water damage can also be caused by sneaky leaks, like the condensation that drips out of your air conditioner or a dripping pipe.
Recent data shows that one in 50 insured homes has a water damage claim each year. When left untreated, water damage can lead to all sorts of major problems, like mold and foundation cracks.
Here are the specifics of when a water damage claim is covered by homeowners policies, when it’s not covered, and the steps to take if you need to file a water damage claim.
Does Home Insurance Cover Water Damage?
There are instances in which water damage will be covered by your home insurance and others when it is not.
Water damage is covered if it is “sudden and accidental, such as if a washing machine supply hose suddenly breaks or a pipe bursts in your home,” according to Quentin Coolen, CEO and co-founder of Waffle Insurance, a national insurance group.
The caveat is that exclusions and payout limits apply. In general, “homeowners insurance does not cover water damage resulting from poor maintenance of the home,” says Coolen. For example, a neglected issue that occurred years ago and is now causing major problems may go uncovered.
”Some policies limit the amount of water damage to a home, sometimes to $10,000,” says Jason Pruitt, regional director at Florida-based Altieri Insurance Consultants.
Situations when water damage is covered by home insurance:
Accidental overflow from appliances, like a toilet or washing machine
Water damage from rain or snow
Plumbing issues, like burst pipes and frozen pipes
Water damage that results from extinguishing a fire
Roof leaks that cause water damage inside your home
Situations when water damage is not covered by home insurance:
Poor maintenance
General wear and tear
Gradual leaks that worsen over time
Ground seepage
Water backups
Sewer pipe backups
Flooding
How Much Will My Insurance Cover?
With most home insurance claims, your insurance company inspects the damage and writes you a check for the cost of repairs, minus your deductible. But with water damage claims, it’s not always that simple. The source of the water damage may be covered, but not the secondary losses.
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Home insurance covers certain types of water damage, but not all. Covered claims must be sudden and accidental, which means things like seepage and gradual leaks are excluded.
For example, let’s say that your water heater unexpectedly bursts, causing flooding in your basement. As a result, stored holiday decorations are now damaged by the water. The damaged water heater and pipes will likely be covered because it was sudden and accidental (the two criteria for a covered water damage claim). However, it’s very unlikely that your insurance company will cover replacing the damaged decorations.
When it comes to filing a water damage insurance claim, acting quickly is important. Here are the steps you should take to file a water damage claim:
1. Document all the damages.
Document all of the damages with pictures and videos. Even minor damage should be noted. Document the evidence before you start cleaning up or throwing out damaged personal items. If someone else caused the damage, like a contractor or plumber, get their contact information. Package up the files and be ready to send them over to your insurance company.
2. Contact your insurance company.
The next step is to contact your homeowner’s insurance company and notify them of the water damage. They will start the claim process, have you fill out paperwork, and match you with a claim adjuster who will oversee your claim, review the damage in person, and recommend your final payout.
3. Meet with a claims adjuster.
If you’re dealing with severe water damage, a claim adjuster will likely visit your home to evaluate the damage in person to assess the extent of the damage, how it happened, and estimate the cost to fix.
You can also hire your own public claims adjuster to get a second, and potentially less biased, opinion. “I recommend always hiring a licensed public adjuster to handle your insurance claim,” says Pruitt. “They are licensed through the state and handle all aspects of your claim from start to settlement.”
4. Prevent further damage and secure surviving valuables.
Don’t hire a contractor or spend thousands of dollars on major fixes, but do what you can to prevent further damage. For example, turn off the main water line to stop the water from flowing, make temporary or minor repairs to help stop the damage from continuing, or move stored items to a safe place. If you purchase anything, keep your receipts to include in your claim.
What to Do If Your Claim Is Denied
Even if you think you have a valid water damage claim, it’s possible that your claim could get denied. If this happens, you have the option to appeal the outcome and renegotiate.
“You always have the opportunity to escalate a case if your water damage claim is denied,” according to Coolen. This is where good record-keeping will come in handy. If you want to appeal your claim, you’ll need to have detailed documentation that clearly shows that the damage is, in fact, covered by your policy.
“With your resubmission, consider adding new evidence of the water damage such as an independent appraisal, and hire an attorney to help support your case,” adds Coolen. Keep in mind, though, the overall cost of paying for additional services could add up and eventually outweigh the reimbursement amount denied from the insurance company, Coolen says.
This is another situation where working with a public adjuster can come in handy. “Public adjusters are the only entity other than attorneys who have the authority to negotiate with insurance companies to correctly settle your claim,” says Pruitt.
Will Rates Increase After a Water Damage Claim?
After a water damage claim, you should expect your home insurance premium to increase, even if it’s your first one. Having a claim on your record means that you are riskier to insure, and there’s a greater likelihood that you will file another claim at some point in the future.
You might not be able to avoid the rate hike, but there are ways to lower your premium after a water damage claim. First, make sure you are taking advantage of every discount you qualify for. You can also consider paying your annual premium in full, raising your deductible, and even switching insurance companies.
© LaylaBird/Getty Images And the bills keep building up
© / Getty Images Old Southeast Neighborhood, Saint Petersburg, Florida
The Home Insurance Guru 