Florida Homeowners Insurance - What to Look For

Florida Homeowner's Insurance - What to Look For


Purchasing homeowners insurance in Florida is more than just a requirement from your mortgage lender. It's a contract that may protect one of your largest financial investments. When purchasing your insurance policy you must take into consideration your area of the country and perils that may affect your home.

Hurricane prone areas like Florida make it especially critical to ensure proper limits and specialty coverages. When buying homeowners insurance in Florida, here are a few things to keep in mind:

1. Adequate Limits: Most people are aware of their home's value when they first purchase it, however, as time goes by, the value changes. Make sure your insurance policy limit change accordingly.
   
   Change in building codes, construction costs, and other such factors may modify the value of your house. Putting on an addition or making major upgrades to the home will increase its value. You want to make sure that you adequately insure these modifications. The last thing you want to face is a total loss only to find out that your house is still valued at its purchase price several years ago, when it actually your home has increased some 50% in value.
   
   The cost to increase your policy limit to the true value of your home is minimal in comparison to the amount you may lose in the event of a total loss. Discuss the rates with your agent. Certain upgrades may qualify your house for rate discounts.
   
   
2. Policy Valuation: When determining the policy limit, the type of valuation used is important. There are two most commonly used valuations:
   
   
   • Replacement Cost: With this form of valuation, the insurance company will pay the amount it costs to repair or replace the damaged property subject to the policy limits, terms conditions and deductibles. They will pay for repair using similar quality materials as the original pre-loss home construction.
     
     
   • Actual Cash Value (ACV): This form of valuation deducts depreciation, wear and tear and other factors from the value of your home.
     
   
   
   Premiums generated with replacement cost valuation are higher, but definitely worth the additional cost. Remember, the purpose of insurance is more than satisfying a mortgage requirement. It is to restore your property to pre-loss condition. ACV on the other hand takes the property price and then depreciates the age, wear and tear and other factors, thus reducing the amount an insurance company will pay. Premiums for ACV are cheaper, but the savings is not worth it at the time of a loss.
   
   
3. Extended Replacement Cost Coverage: After a major catastrophe like a hurricane, building materials are in high demand and become scarce. Similarly construction workers are at a premium due to the high demand, thus driving the cost of repairing/rebuilding your home up. Extended Replacement Cost Coverage takes this into consideration and pays above and beyond the policy limits for such situations. Depending on the insurance company, policies may pay as much as 20% above policy limits. It makes it worthwhile endorsing your policy accordingly.
   
   
4. Know your hurricane deductible: Approximately 70 % of Florida homeowners have a 2% hurricane deductible. That means 2% of your policy limit will be deducted in the event of a hurricane loss (i.e. if your policy limit is $200,000, you will be responsible for the first $4,000 of a hurricane loss).
   In return for this hefty deductible, policy owners are awarded a 10 to 20% premium discount on the wind premium on their policy. This law has been in effect in the state of Florida for about 10 years. It is also common in approximately 17 other hurricane-affected states.
   
   Knowing beforehand that your deductible is 2% will enable you to set money aside on a regular basis to be used in the event of a loss. Imagine your shock if after a loss you become aware of the 2% deductible. Knowledge is key.
   
   
5. Flood insurance: Did you know that a standard homeowners policy does not cover flood damage, which includes storm surge from a hurricane? Don't despair; this coverage can be purchased separately from the Federal Government through the National Flood Insurance Program (www.fema.gov).
   
   If you are confused, contact your insurance agent who should be able to provide you with the proper agency to contact. Be aware, however, that the maximum policy limit at the time of this writing is $500,000.

When buying homeowner's insurance in Florida, being informed is key. Talk to a few agents and do some research on the internet. Just make sure that you do your homework before there is a loss.


Felicia A. Williams who has worked for many years in the insurance industry, is now a freelance writer and owner/webmaster of the family oriented site Tidbits and Stuff. For more articles like this, visit Tidbits and Stuff. Ms. Williams also owns a Hudson Valley travel guide site Visit Hudson Valley.