Florida Real Estate Investors Warn About Insurance Skyrocketing

By: Georgia | Published: Jan 10, 2024

According to Newsweek, the state of Florida is facing a severe home insurance crisis that has garnered the attention of real estate investors nationwide. 

Reports warn that continuously increasing insurance premiums could significantly hinder the ability to secure mortgages in areas prone to extreme weather events.

The Burden of High Insurance Premiums in Florida

In Florida, homeowners are currently grappling with the highest home insurance premiums in the United States. 

A quaint yellow single-story house with a bright red front door, situated in a residential area in Florida. The house features white shutters, a symmetrical façade with two windows flanking the door, and a staircase leading to the entrance

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On average, residents of Florida pay more than $4,200 per year for home insurance, a figure that starkly contrasts with the national average of $1,700. This information, provided by the Insurance Information Institute, or Triple I, illustrates the severity of the insurance crisis in Florida.

Root Causes: Litigation and Climate-Driven Weather Events

Newsweek reports that the insurance crisis in Florida stems from a combination of factors, including excessive litigation and an increase in extreme weather events like hurricanes, floods, and tornadoes. 

Aerial photograph showing the aftermath of a hurricane in a Florida neighborhood. Several homes are severely damaged, with debris scattered across yards and streets

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Scientists have linked these weather patterns to climate change, which has resulted in both increased frequency and severity of such events, contributing to the insurance dilemma in the state.

Insurance Providers Retreat from Florida's Market

The situation has led to a significant exodus of major insurance providers from the state between the end of 2022 and 2023. 

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This departure is primarily due to the escalating number and impact of natural disasters in Florida, leaving many residents with limited options to insure their homes and protect their investments, as reported by Newsweek.

Forecasting Further Increases in Insurance Premiums

According to a report by Karen Clark & Co, a Boston-based risk assessment management firm, insurance premiums in Florida are expected to continue rising this year.

A street view of a serene suburban neighborhood in Florida, featuring a row of single-story houses with terracotta tiled roofs and beige stucco exteriors. The homes have neatly manicured lawns, tropical palm trees, and a clear blue sky overhead

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The report attributes this trend to the ongoing increase in the risk of extreme weather events, signaling more financial strain for Florida homeowners.

Rising Construction Costs Exacerbate Insurance Premiums

Newsweek also highlights another factor contributing to the rising insurance premiums is the significant increase in construction costs, which have risen by 40% since 2017.

A construction worker in blue jeans and a reflective yellow vest is seen working atop the wooden frame of a building under construction. The worker, wearing a yellow hard hat and a tool belt, is bending over as they appear to be examining or working on a part of the wooden structure

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These costs are a crucial factor in determining insurance premiums, as they affect the estimated expense of rebuilding homes after disasters like hurricanes.


Real Estate Investors Voice Concerns

Real estate investor Sean O’Dowd expressed his concerns about the situation on X, formerly known as Twitter, stating, “This is the biggest story in residential real estate over the next decade.”

A residential street in Florida lined with modern two-story homes. The street is wet from recent rain, reflecting the blue sky with scattered clouds

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He further commented, “If the insurance increases don’t stop, it becomes very difficult to get a mortgage in hurricane- and wildfire-prone areas.”


Social Media Highlights the Impact on Homeowners

The real-world impact of these insurance hikes was highlighted by a social media user who posted on X that their parents’ insurance bill in Florida had “jumped from $2,500 to $6,000 in the last three years.” 

A white two-story house with a spacious balcony, framed by an abundance of tropical plants and palm trees. In the center of a brick circular pathway, there is an ornate fountain

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The same user reported that the rate increased by 50% in 2023 alone, illustrating the rapid escalation of insurance costs for residents.


What Buyers Should Know in Florida

Although Florida is known for its warm weather, the risk of natural disasters is also present in the form of hurricanes, flooding, heatwaves, droughts, and wildfires.

A white single-story home with a gray roof is nestled among mature palm trees and lush landscaping. The front of the house is partially obscured by a variety of green shrubbery and an arched entryway covered in climbing plants

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As Redfin points out, homebuyers can use maps from the National Weather Service and the state of Florida to see where these events have occurred, and what areas might be at risk later on.


Personal Accounts of Soaring Insurance Costs

Individuals across Florida have shared their struggles with the escalating insurance costs.

A cityscape view capturing the blend of historic and modern architecture in a Florida city. In the foreground, a street flanked by brick buildings leads toward contemporary glass and concrete skyscrapers in the background

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Robert Kantor, a resident of Broward County, told Newsweek that his homeowner’s insurance had doubled to more than $7,000 last year. He said, “With taxes, I am paying in excess of $10,000 just to stay in my home.”


Homeowners Consider Selling

Mike Derham, who owns a three-bedroom holiday home on Melbourne Beach, told Newsweek that the property now costs him $11,000 per year to insure. 

View from the water of a grand, two-story mansion with classical architecture, situated on the waterfront. The home features a symmetrical design with a central pediment and columns, flanked by tall palm trees

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He added, “We will be selling up,” citing the unaffordable increase in insurance premiums as the primary reason for this decision.


The Uncertain Future of Florida's Real Estate Market

As the insurance crisis in Florida continues, its impact on the real estate market and homeownership remains a topic of great concern. 

Top-down aerial view of a residential neighborhood in Fort Lauderdale with homes along curving waterways. The houses have a variety of roof colors and are surrounded by lush greenery and tropical palm trees

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The increasing premiums, combined with limited insurance options, pose significant challenges for current and prospective homeowners in the state. The coming years will be crucial in determining the trajectory of Florida’s real estate landscape in the face of these challenges.