As a native of Florida and a resident for 27 years, I have dealt with several hurricanes as a renter, a homeowner, and a landlord. While the storm itself can be scary to someone who has never lived through one before, most people who live in Florida get more anxious about their hurricane insurance. A recent series of bad storms has made obtaining hurricane coverage in Florida an expensive and risky proposition. If you’re a new resident or homeowner in Florida, here are a few tips to help you navigate the system.
Renters
Most rental insurance policies cover damage to household goods due to flooding or structural damage (that is, damage to the residence that resulted in damage to your personal property). Because renter’s insurance does not cover any damage to a physical structure (ie. The house, condo, or mobile home that is being rented) the insurer’s liability for damage during and after a hurricane is pretty limited. Thus, there has not been a lot of change to renter’s insurance policies over the past few years despite the changes to homeowner’s policies.
As a financial counselor, I recommend that all of my clients who rent their primary residence carry renter’s insurance. One of my clients reluctantly followed my recommendation to get renter’s insurance, then two months later was relieved to discover that the policy would cover the furniture she had on a covered, enclosed back porch which flooded during Hurricane Ivan.
A typical policy costs about $15 a month; a small price to pay when you consider the amount of damage that just one broken window during a hurricane can cause. Most policies have a deductible of about $500. When shopping for a policy, make sure to read the fine print about how your deductible will be paid. Some policies will cover things like spoiled food without assessing the deductible.
Homeowners
Homeowner’s policies are much more complicated than a renter’s policy. Typically insurance companies will charge two separate deductibles; one for hurricanes and one for all other disasters. Usually, the hurricane deductible is set to 2% of the value of the insured property. Be very careful with this; insurance companies typically change the value of a home every year. By raising the amount they believe it would take to replace your entire structure, they are essentially raising your deductible on even a partial damage claim.
It is very important to note that no policy will cover flood damage. In order to be covered in case rising water damages your home, you must purchase separate flood insurance. If your home is in a FEMA flood zone (typically anywhere 7 or less feet above sea level) the cost of flood insurance will be very high, and a hurricane rider on your homeowner’s policy may be impossible to get. If this is your situation, you might want to look into Citizen’s Insurance. This insurance company is subsidized by the state of Florida and covers anyone who cannot get hurricane coverage through another insurer at a reasonable rate. In order to qualify, you must three letters from insurance companies stating that you have been denied (or dropped) for insurance or three quotes for insurance that are more than double the rate you would pay to Citizen’s.
Expect to pay about 1%-2% of your home’s value per year in premiums if you do not live in a flood zone, and between 2% and 5% if you do live in a flood zone. When shopping for a policy, look carefully at the deductible formula and any caps or limits on your coverage for household goods, accessory buildings, landscaping, and swimming pools.