Moving to Florida? Budget More for Home Insurance Than Expected

While Florida has been one of the top states that people have moved to in recent years, prospective residents should know that the warm weather comes at a cost. Home insurance rates in Florida have recently soared, making it the most expensive state to cover a house. Before you start looking for a new home and calling moving companies, learn how severe weather events are causing insurance premiums to rise in the Sunshine State.

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Why Are Florida Home Insurance Rates Rising?

Home insurance rates in Florida increased by an average of 68% between 2021 and 2023. Although Johnson says that damage from hurricanes is a primary reason for the state’s high rates, he thinks several factors are at play. “Insurance fraud, severe weather events, and a very litigious environment in the state contribute significantly to the higher potential for losses among insurance providers,” Johnson says.

Inflation

High inflation in recent years has increased costs for nearly everything, and insurance premiums are no exception. Large losses in states such as Florida have led insurance companies to struggle when paying out claims for rebuilding and repairing homes.

Medders explains that those rebuilding costs were also affected by inflation. “The cost of construction materials and labor rose during 2021–2023 at rates surpassing the overall inflation rates, making payment of claims more expensive than expected,” Medder says.

Although the rate of inflation has decreased in recent months, Florida homeowners will still likely see insurance premium increases this year. Prices may rise at a slower rate in the future, but insurance costs are predicted to jump as high as 50% or more for some Floridians this year.

Lack of Options

Another factor behind Florida’s rate increases is a lack of competition, as many insurers have stopped writing new policies. Frequent and devastating hurricanes have made Florida a costly state to insure, leading dozens of companies to leave the state in recent years. In the 1980s, Florida saw an average of one disaster per year exceeding $1 billion in losses; in the past five years, Florida has seen an average of almost five disasters per year exceeding $1 billion in losses.

For insurance, customers are flocking to Citizens, Florida’s government-backed insurance company meant to be a last resort for customers unable to find coverage elsewhere. Over the past five years, Citizens has written a record number of new policies, rising from roughly 442,000 policies at the end of 2019 to 1.2 million today.

Some experts think Citizens lacks the funds to pay out claims in the event of a difficult season. Medders says that state-established entities like Citizens “have limited claims-paying capacity. A ‘big one’ or successive series of significant loss events is questionably absorbable by the state’s economy and insurance system.” Citizens announced that policyholders may have to pay a 15% surcharge on top of their premiums in the event of a deficit to cover potential issues.

Extreme Weather Events

Since the government began documenting hurricanes in 1851, Florida has seen the most hurricanes of any state: 125 storms, with 40 of those being major hurricanes. A record five storms hit Florida in 2004, causing $40 billion in damages and nearly 100 deaths. Hurricanes have recently battered the state, leading to billions of dollars in insurance claims.

Hurricane Ian, a Category 5 hurricane that destroyed hundreds of homes in 2022 as it battered the Fort Myers area, caused prices to rise and insurers to leave the state. The second-costliest hurricane after Katrina, Ian led insurers to raise rates by 42% the following year. Even before Ian, home insurance rates had been climbing at an average of 33% per year due to numerous lawsuits and fraud.

High insurance rates and the departure of insurance companies from Florida can largely be blamed on the high cost of repairs following severe weather events. As more frequent storms do more damage, homeowners are competing for labor and materials. “Not only is it more likely that your property is damaged, but it’s also more expensive to fix when it is damaged,” McCartney says. “Insurance companies know all this, of course, and therefore choose to either charge a lot upfront or just leave the market entirely.”

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How Are Home Insurance Rates Shaping Florida’s Housing Market?

Some experts believe that high insurance costs are stopping people from moving to Florida. In South Florida, many residents who decided to sell their houses after Hurricane Ian in 2022 have been unable to find buyers. Elevated mortgage rates, increased inventory, and the high cost of insuring properties are keeping some prospective buyers away.

While the price of single-family homes is still rising, condominium prices in Florida have dropped due to high insurance costs and homeowners association (HOA) fees. Condo associations have faced more rigorous building codes since the 2021 Surfside condo collapse in Miami. This leaves owners with the cost of insuring their own properties while paying high HOA dues.

Some homeowners are opting out of home insurance entirely. Medders considers this to be a risky gamble. “A lack of home insurance not only threatens the value of the home as an asset but also could leave a family with nowhere to live at a time when they are experiencing other hardships,” Medders says.

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How Does Climate Change Impact Home Insurance?

Climate change-caused issues often increase hurricane-related damages. As glaciers and ice sheets melt, the volume of ocean water increases, and sea temperatures rise. Nation says that “higher-temperature waters evaporate more quickly, which can lead to rapid intensification of storms, causing storms to increase in size and frequency.”

Warming water temperatures are causing more intense storms with a greater potential for significant storm surges and flooding. This can take place during storms and even during high tides as sea levels continue to rise. Flooding can damage residences along with important infrastructure such as roads, sewage treatment plants, water supplies, and power plants.

Climate change is altering wind patterns, leading to storms that stay in one place for longer. Most people think of hurricanes as major wind events, but once the wind has slowed, storms can take time to move away. This leads to huge amounts of rainfall in already saturated areas and widespread flooding. Hurricane Ian is one example—the Federal Emergency Management Agency (FEMA) paid almost $4 billion in flood insurance claims.

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Our Conclusion

Planning a move to Florida doesn’t need to be scary if you know the risks and costs involved. It’s a state with year-round mild temperatures, plenty of entertainment options, and stunning natural beauty. Budgeting for extra insurance costs, being aware of flood zones, and knowing how to protect your house will help you avoid future headaches as a Florida homeowner.

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