Insurance Costs Forcing Floridians to "Go Bare"

Tracy Casper, who lives east of I-95 in West Palm Beach, is livid because her wind insurance rate just jumped 194 percent to $7,443.

Ouch.

Like many other Floridians whose insurance coverage is now being assigned, her house got taken out of Citizens Property Insurance Corp. and put into Florida Peninsula Insurance, a company that just asked for an average 101 percent rate hike in Palm Beach County.

Tracy, a nurse married to a high school teacher, is not exactly rolling in money. So she that she and her husband have decided to drop home insurance coverage all together. Or, as the saying goes, “go bare.”

Many readers of this article, from today’s Palm Beach Post, are probably green with envy. Most homeowners, after all, don’t have the option of simply dropping their property insurance if it gets too pricey. Reason being? Most mortgage lenders won’t allow it.

“Most financial institutions will require you to carry enough insurance to protect their vested interest in the property,” said Tami Torres, a Florida Department of Financial Services spokesperson, who acknowledged that more and more people are looking into ways out.

Tracy said they’ve made lots of improvements to the house and figure it won’t get hit with significant damage. They’re willing to take the risk. But can they?

The rule of thumb has always been that, if you have a Florida mortgage loan, insurance is a requirement, not merely a suggestion or luxury item. But Tracy shows that it never hurts to ask. She and her husband still have a home loan, sure enough, but she says their mortgage provider signed off on the plan.

Going bare isn’t a decision you make lightly. You could be on the hook for your biggest asset, and need to determine if your house — and wallet — can weather a storm without any coverage. Then you need to decide if you can stomach that kind of risk.

It sure sounds like a dangerous gamble, but when wind insurance costs skyrocket, many people naturally start wondering if its worth paying 400 percent what they did a few years prior. Officially, the state of Florida doesn’t recommend you go bare. But if you’re going to do it, Torres suggests you at least get your lender’s approval in writing.

Despite the risks, people have been predicting for months that the South Florida housing market would be inundated with dropped insurance plans as tens of thousands of retirees aren’t in possession of home loans and thus required to buy coverage. The fact that property tax bills — for which there are no means of simple opting out — are also soaring makes the insurance premiums that much more tempting to dump.

What about you? Have you dropped your insurance? Would your Florida home mortgage provider even allow it? Do you know someone who has confronted this situation, for better or worse? If you haven’t thought about it until now, chances are you will in the months ahead.