Predictably, Florida Homeowners Insurance Ranked Among Nation’s Most Expensive
Sure, hurricanes and earthquakes and floods are bad. Tell us something we don’t know. What’s more surprising is that the cost of insuring a home usually comes down to less damaging, but more common factors such as wind and hail, according to Forbes.
People who play Florida insurance premiums know all too well what a costly (and necessary) ordeal insuring a home can be. People whose homes have wood frames, or live in regions that lack nearby construction materials, are at even greater risk — and cost. For insurers to calculate risk and price their policies, all of these factors are accounted for.
The National Association of Insurance Commissioners (NAIC) recently came out with a report of the most expensive states to insure a home, ranking each of the 50 states. Not surprisingly, Florida homeowners insurance is some of the nation’s priciest. The average cost to insure a U.S. home in 2003 was $668 a year, but the range extends from an average of $433 per year in Idaho to $1,328 per year in Texas. The top five costliest areas:
- Texas – $1,328
- Louisiana — $975
- Oklahoma — $925
- Florida — $810
- D.C. — $806
Hurricane-prone states such as Florida and Louisiana, along with windy and tornado-heavy states like Kansas and Oklahoma, therefore, have the most expensive homeowners insurance policies. But it’s not just Florida property insurance that is a strain on the wallet. Densely populated cities like Washington, D.C., and places such as Mississippi where a large amount of houses are less structurally sound, also place high on the list.
Louisiana floods and California earthquakes are expensive for insurance companies to cover, however most policies that cover such disasters are offered separately from basic homeowners insurance and are not included in the NAIC’s figures. Still, residents of the Southeast U.S. who are bracing for the next Katrina will find basic insurance expensive in spite of the fact that flood insurance is separate.
Premiums also vary greatly within certain states. Dense urban areas are more expensive than rural areas, according to the Consumer Federation of America, a consumer advocacy group. But despite a slew of storms over the past 18 months, analysts don’t see overall premiums for insurance rising much. The biggest reason? Rising interest rates. When they’re high, and going higher still, major carriers like Nationwide Financial Services actually offer premiums at a loss, and make money by investing premiums in interest-bearing accounts.
So you’re probably okay. Oh, unless you live near the coast. As much of the state of Florida does. You knew there was a catch.
Florida Insurance Commissioner Kevin McCarty has been calling for a national catastrophic insurance plan, in which taxpayers across the U.S. would fund a program to cover massive losses from storms and earthquakes. With great Florida real estate and infrastructure damage forecasted in upcoming years, state officials believe this step is necessary. How this is viewed by politicians in states that are mostly out of harm’s way, such as Iowa, remains to be seen.
“They’re already paying for it, but in the most inefficient way possible,” McCarty said, referring to the much-maligned Federal Emergency Management Agency, which would presumably have its role scaled back if a national insurance plan were implemented.
