The allure of sunshine, low taxes and low housing prices have been attracting people to Florida for decades, but high insurance premiums are beginning to reverse the trend.
The U.S. Census Bureau shows that nearly 276,000 people left Florida in 2022, and it’s believed that skyrocketing insurance premiums motivated many of the departures.
The study showed most of the former Florida residents remained in the sun belt, moving to states like North Carolina, Georgia, Tennessee and Texas. Those states offer similar benefits as Florida in terms of low housing costs and tax rates. What they also have in common is that they are not currently experiencing the insurance rate crisis that has gripped Florida for the last several years.
Premiums Going Up And Insurers Exiting Stage Left
The Sunshine State’s insurance industry has suffered for many years from a combination of more frequent, more dangerous hurricanes, causing the cost of claims to rise. Four hurricanes made landfall in Florida since 2017, and three of them have been category 4 or 5. The total damage has been in the tens of billions of dollars.
They have come so fast and so frequently that insurers have barely recovered from the cost of covering claims for one hurricane when the next one comes rolling in. Adding to the misery is that as property values have spiked, the cost of claims has multiplied several times as well. Insurance companies are not set up for this situation.
Insurers cover their potential losses by purchasing something called reinsurance, which is an insurance policy that insurance companies buy to protect themselves in the event of a natural disaster. The cost of recent hurricane claims has caused reinsurance rates to spike, and that has led to an unprecedented rise in home insurance premiums for Florida home and business owners. Worse yet, it’s causing many insurance carriers to leave the state entirely.
A Different Kind Of Sticker Shock
According to the Insurance Information Institute, Florida insurance premiums have gone up by 300% in the last five years. The average cost of home insurance in the United States is $1,700, whereas Floridians pay over $4,200 annually if they can get insurance at all.
Instead of renewal notices with higher premiums, many Floridians are getting notices advising them that their insurance carrier is leaving the state, and their policy will not be renewed. Retirees are getting hit even harder as premiums take up huge chunks of their fixed income, which contributes to the exodus.
Having Insurance Is Only Half the Battle
Even the Florida residents who are fortunate enough to be able to afford their insurance premiums are struggling. In addition to the property damage, every hurricane leaves thousands of lawsuits between angry homeowners and insurance companies in its wake. The cost of fighting these lawsuits is another factor in motivating insurers to leave Florida.
A Problem Without A Solution?
The exodus of insurers from Florida has left Citizen’s Property Insurance Corporation as one of the state’s largest insurance providers. The problem with that equation is that Citizen’s is a state-run insurance provider that was not meant to be anything more than a last resort for people on the insurance market. For many Floridians, it’s becoming the first option.
The idea of a state that doesn’t charge income taxes being on the hook for millions of home insurance policies is problematic. If another storm that matches the power of Hurricane Andrew slams into Miami or Tampa, paying out the claims could potentially bankrupt the state. That is why so many Floridians are choosing to become ex-Floridians.
Source: yahoo!finance
