Homeowners Self Insurance

[StillHacking]

OK gang, I don't post often but sincerely appreciate the depth of knowledge shared here. Anyhow My savings and assets are strong, so even with current market turbulence DW and I should be fine unless there's an apocalypse.
My primary house in Pennsylvania is paid for and insured. Second house in Florida is also paid off and I have been informed my insurance will be canceled by the end of next month.
There is pushback on the life expectancy of the roof as I shop for new policies. Roof is tile and in good shape as per a 4 point and wind mitigation inspection on 3/1/2021. Anyone in Florida knows they are sticklers on roof lifespan and inspections. Unoccupied houses scare them too. we visit for almost 6 months throughout the year. Zillow and such values the FL home at 492K but in my opinion it's worth only half that. If I had to replace it even at 500K it would be unpleasant but I could do it. I have quite a bit of cash on hand.
I feel self-insurance might be a good idea at this point perhaps with an umbrella policy for personal injury as a backup. House has been there since 1969 with no claims that I know of since 1992. Certainly nothing catastrophic ever.
Your input on this would be appreciated.

 

[CardsFan]

OK, I'll play.

Keep in mind three different numbers:

1. you think the home is only worth $250k

2. Zillow says $500k

3. But have you priced a rebuild? Could be close $1,000k in today's market.

In any event, if this is second home, and you are willing to walk away with nothing, go for it.

Personally, I would find a way to satisfy the insurance company.

 

[MichaelB]

OK gang, I don't post often but sincerely appreciate the depth of knowledge shared here. Anyhow My savings and assets are strong, so even with current market turbulence DW and I should be fine unless there's an apocalypse.
My primary house in Pennsylvania is paid for and insured. Second house in Florida is also paid off and I have been informed my insurance will be canceled by the end of next month.
There is pushback on the life expectancy of the roof as I shop for new policies. Roof is tile and in good shape as per a 4 point and wind mitigation inspection on 3/1/2021. Anyone in Florida knows they are sticklers on roof lifespan and inspections. Unoccupied houses scare them too. we visit for almost 6 months throughout the year. Zillow and such values the FL home at 492K but in my opinion it's worth only half that. If I had to replace it even at 500K it would be unpleasant but I could do it. I have quite a bit of cash on hand.
I feel self-insurance might be a good idea at this point perhaps with an umbrella policy for personal injury as a backup. House has been there since 1969 with no claims that I know of since 1992. Certainly nothing catastrophic ever.
Your input on this would be appreciated.

Are you sure you can get umbrella liability coverage without insuring the second home?

Perhaps homeowners insurance with very high deductibles will lower the premiumnenough to make it affordable. This is what we did.

 

[Time2re]

Be sure and figure in the value of your personal property (contents) and loss of use (in case of a significant loss) and a possibly significant liability exposure. Overall exposure way more than $250,000 or $500,000.

 

[euro]

This will be testing your personal tolerance for risk.... Personally, I think it is entirely reasonable to consider self-insurance. The problem is the liability part. No, you cannot just get an umbrella policy to cover it. Any umbrella will require an underlying individual liability policy for your house. The question is: will you be able to find an insurance company that writes "liability only" policies for individual homes. I have been told that there ARE companies that will do that, but I have not personally pursued it (yet...). All I know is that MY current insurer (State Farm) will NOT write "liability only" for my rentals here in NC. They do have a "reduced replacement value" policy that lets me cut SOME of the premium, but will not write liability only. If I could get that, I would SERIOUSLY consider self-insuring.

 

[StillHacking]

I'm currently wrangling to refresh the 4-point inspection and shop for insurance. Dwelling is/was insured for only 209K. It looks like current wisdom is to insure. Some might consider it a teardown but we don't. Florida makes things difficult.

 

[38Chevy454]

I agree that self insure sounds good. But then reality of can't get umbrella without a liability policy on the house. No your PA house liability and umbrella will not cover for FL house. FL is a PITA for insurance. But I think you need some kind of liability insurance at least, which probably means working more with insurance companies to get a FL house policy.

 

[OldShooter]

Are you shopping on your own? A good independent agent should be able to discuss tradeoffs and answer your questions.

 

[MichaelB]

Florida homeowners insurance is a real challenge and calling an agent may not help much. Top tier insurers stopped writing new policies years ago. The insurers that do write policies are second and third tier, and one of the largest of those, FedNat, just announced yesterday it is dropping 40% of all its Florida policies. I’m doubtful there is enough insurer capacity in Florida right now to take on that burden.

Citizens, the State sponsored “insurer of last resort”, is an option. They are hostile and endlessly trying to transfer policies to the small, little known and untested Florida insurers, but they will take all applicants that can’t find insurance elsewhere and for a year at least will keep the residence insured while the policyholder looks for better alternatives.

 

[bigcmagor]

For $25 per year, Safeco extends liability coverage from my Indiana home to cover the Florida home, which we otherwise do not insure. We also have a $2 million umbrella that is more expensive than others pay and I'm sure where they make up some of the premium. When we made the decision to self insure for physical loss, the lot alone was worth $100k less than the value with the house. Things have changed somewhat in the last few years and I've been unable to get any insurers to quote full coverage. It's easy to be brave about this until there's a storm spinning in the Atlantic.

 

[StillHacking]

Florida homeowners insurance is a real challenge and calling an agent may not help much. Top tier insurers stopped writing new policies years ago. The insurers that do write policies are second and third tier, and one of the largest of those, FedNat, just announced yesterday it is dropping 40% of all its Florida policies. I’m doubtful there is enough insurer capacity in Florida right now to take on that burden.

Citizens, the State sponsored “insurer of last resort”, is an option. They are hostile and endlessly trying to transfer policies to the small, little known and untested Florida insurers, but they will take all applicants that can’t find insurance elsewhere and for a year at least will keep the residence insured while the policyholder looks for better alternatives.

Fed Nat was my insurer. I'd like to maintain insurance but I don't like being back against a wall. I'd rather brave a storm. I'm on the gulf side. Slightly safer than the Atlantic side.

 

[pb4uski]

Yeah, Florida is a mess with respect to insurance. I wish our governor would lead there rather than waste his time with political revenge against Disney... but to enact insurance reform would be hard.

Our Association insurance is up for renewal this month and the best quote is 45% over last year and without the new roofs that we just added it would have been higher. That quote was from the incumbent insurer, the next lowest quote would have been more than double that. Our agent had one Association whose insurance increased from $150k last year to $575k this year... they shopped it around and couldn't find a better deal so they sucked it up and renewed.

 

[Chuckanut]

I've heard for several years that Florida homeowner's policies are dicey because of the hurricane threat. Basically, the market in Florida is broken.

But, even in my home state, the advice from insurance brokers is to take the highest deductible you can get, since even a small claim could trigger a non-renewal action on the part of the insurance company. That could easily cost you more than paying a few small losses out of pocket.

 

[jim584672]

I've been reading crazy stories about Florida homeowner's insurance and how it is super high right now.

 

[Bamaman]

More and more stories about Florida homeowners insurance is heard daily. It's not like a hurricane hits every year--when it's more like every 10 years. You'd think the money to pay claims would be there when the premiums are so excessive year after year after year.

Insurance companies essentially charge premiums by the $1000 of coverage. And they have a big racket using a computer to tell'em what replacement values are--the cost to rebuild. Buy a house today and get it insured for your purchase price. In 2-3 years, they'll be charging you twice or more what you paid for the house. Then if you choose not to rebuild on a total loss, they will depreciate the home--and not pay you half what you're paying premiums for.

If your house is built very solid, as in a concrete structure, and you're not a big risk to have it blown away in a hurricane (or floods), just get liability coverage. Or find a company that will do a stated value insurance policy--if there is any such thing in FL.

 

[Scuba]

Wow, I’m surprised with the difficulty of insuring that the home market seems to be so strong. Prices don’t seem to indicate any reluctance on the part of buyers.

 

[Souschef]

We have similar situation here in So Cal. because of the losses caused by wild fires, insurers are either leaving or raising their rates.

 

[Sunset]

I'm pretty shocked by some saying self insure is fine.
I know when we looked a few years ago in FL at a Park Model home, I considered buying one and not insuring it because it was CHEAP at $30K.

But a real home worth $450K , I'd get insurance even if the deductible is $20K , should you need to rebuild, the deductible is a lot cheaper than a new house.

Besides the difficulty of insurance, what prices are people paying ?

 

[athena53]

Can you buy a homeowners policy excluding windstorm? My late parents lived in N. Myrtle Beach. It was a modest home and they'd paid cash. They finally dropped windstorm coverage, figuring the land was worth more than the house. They lived modestly and would have had the resources to replace contents and move on if the worst happened- but it never did. Dad sold after Mom died in 2016.

I agree with the comments in Umbrella coverage. Typically it pays Liability claims on your home (slip and falls, etc.) only for the excess over some large amount like $100K (amount depends on the policy). If you don't have liability coverage for that amount on your Homeowners policy it comes out of your pocket.

 

[Koolau]

I'm pretty shocked by some saying self insure is fine.
I know when we looked a few years ago in FL at a Park Model home, I considered buying one and not insuring it because it was CHEAP at $30K.

But a real home worth $450K , I'd get insurance even if the deductible is $20K , should you need to rebuild, the deductible is a lot cheaper than a new house.

Besides the difficulty of insurance, what prices are people paying ?

Agreed. Just recall that the watch-word of insurance is to insure for a loss you can't afford. If you can replace a house blown over by a hurricane, by all means, go naked. Otherwise, figure SOME way to deal with the insurance.

I understand the insurance industry's reluctance to insure FL homes - especially second homes. Insurance companies do NOT want to pay out claims. If they have a bad year of claims, they come unglued and charge outrageous premiums. It's the only game in town and they all play the game the same way.

Here in the Islands, hurricane insurance is a joke. You can get it (in fact it's required by mortgage companies.) The catch: No matter what your premiums, the insurance co.s will only pay out a given amount for the whole Island (or state - I forget). SO if your home is the only one damaged, you'll come out pretty well. If, as happened with Iniki on Kauai, back in 1992, every structure on the Island was damaged, you will get only a small payout - Iniki is the reason this "scam" became the huricaine insurance "model." Good deal for the insurance company. So the insurance companies limit their total liability and folks with damage split the pot. Payouts per owner can be a pittance if the damage is widespread.

Heh, heh, FL insurance doesn't look so bad after all, does it? YMMV

 

[street]

My insurance has been going up and they tell me it is because of coastal states and the destruction that keeps occurring. Claims are not common in the area we live because we don't have the total devastation some of these states have. So, we are paying for those losses also with continuing homeowner insurance and not having those issues.

 

[pb4uski]

A lot of the problem is what I view as fraud. Roofers going door to door telling homeowners that they can get them a new roof free, the homeowner assigns their insurance benefits to the roofer who then collude with lawyers to sue insurers for the cost of the new roof claiming it was damaged by wind or a hurricane when in fact it was really just an old roof that needed to be replaced because of old age and normal wear and tear.

 

[Koolau]

A lot of the problem is what I view as fraud. Roofers going door to door telling homeowners that they can get them a new roof free, the homeowner assigns their insurance benefits to the roofer who then collude with lawyers to sue insurers for the cost of the new roof claiming it was damaged by wind or a hurricane when in fact it was really just an old roof that needed to be replaced because of old age and normal wear and tear.

I guess that makes folks who gang-loot jewelry stores seem almost honest! I hope they go after home owners who participate and not just the roofers. I suppose Insurance companies are in the enviable position that they can just ignore such fraud and charge everyone higher premiums. Problem solved.

 

[pb4uski]

Yeah, its sort of like health insurance... medical providers charge exhorbiant rates and the health insurers just include those costs in their premium calculations and pass it on to insureds... same thing.

FWIW, I don't think that the P&C insurers are making out like bandits in Florida so it's not like they are price gouging... in fact some have withdrawn because they were losing money and some have stopped writing because they were financially shaky.

It's a huge mess without an end in sight because Tallahassee isn't doing anything about the problem. Remember in November! and vote the bums out.

 

[athena53]

Yeah, its sort of like health insurance... medical providers charge exorbitant rates and the health insurers just include those costs in their premium calculations and pass it on to insureds... same thing.
<snip>

It's a huge mess without an end in sight because Tallahassee isn't doing anything about the problem. Remember in November! and vote the bums out.

Serious question: what can the government do?

People want to live on the coasts.
The government can't prevent hurricanes although they can enact and enforce building codes that might mitigate damage.
They CAN regulate insurers, requiring that they use credible catastrophe models (and those have improved by leaps and bounds) to estimate potential windstorm losses. They can (and do) also require them to have adequate reinsurance in place.
They can use taxes collected from people not living on the coasts to subsidize rates but that's generally not popular.
Forcing companies to provide coverage at less-than-adequate premiums just means they leave the state.

I saw one proposal for a countrywide catastrophe pool, but it helps people in the high-hazard states only if the people in Idaho and Michigan pay more than their fair share. It never happened.

My solution: after a major event, you collect your insurance and if you want to rebuild, fine, but no insurance company will be forced to cover you and no government money will bail you out if it happens again.