Why is coastal home insurance so expensive?

People are often surprised by how much home insurance costs when they move to Florida.  Florida routinely has one of the highest average homeowners insurance premium in the county, nearly 70% above the national average according to the Insurance Information Institute (iii),. The others at the top of the list include Louisiana, Texas, Oklahoma, and Kansas. When you stop to think about it, it makes more sense than at first glance.

#1 Florida has some of the most nutural disasters

Nationwide, property damage (as opposed to liability) accounts for 95% of claims. This includes things like fire, lightning, wind, hail, and theft. The first thing you think about when you think of the top 5 states listed above, you think of hurricanes and tornadoes. After all, 80% of all hurricane landfalls hit TX, LA, and FL and 25% of all tornadoes hit TX, KS, and OK. Florida is #1 in hurricanes, #3 in tornadoes, and #1 in lightning.

Interestingly, wind and hail are not the most severe claims. That unfortunate distinction belongs to fire claims, whose average damage is more than 5 times the average wind claim. Fire often results in a total loss because it the fire doesn't ruin the house, the thousands of gallons of water poured on it from the fire department surely will. But fire claims are not common, in fact you are more likely to have twins.

Wind claims are however the most frequent claim, an easily discerned fact based on the wide scale of damage caused by tornados and hurricanes which boost the frequency numbers. Florida has been hit by the majority of hurricane landfalls over the last 75 years, twice as many as the next state, so it should come as no surprise that insurance companies account for that in their pricing. Being a few miles from the coast is still close enough to experience major damage.

#2 Lack of competition between insurance companies

One of the biggest problems Florida has is the lack of competition among insurance companies, which drives up the price. None of the top ten writer of homeowners insurance in the United States (by premium $) are significant players in the coastal Florida homeowners insurance market. 35 of 67 counties in Florida are coastal, so half of the state and the majority of its population are serviced by a smaller list of insurance companies, many of which specialize in high-risk areas around the world.

What am I supposed to do about it?

Where your home is and what it's made of make a big difference and give you an element of control in how much you'll pay for insurance. Check out a previous blog post about this topic to learn more about what to look for when choosing a home.

Norton Insurance has been around 40 years and have worked with hundred of insurance companies in that time. Many of them come and go but we are still here serving the coastal home buyer. Despite the obstacles, there are still plenty of options for home insurance in Florida and some excellent insurance companies. Feel free to contact us and we will happily answer your questions!

further references: https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance Blog Archive - Search Blog

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