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In yesterday’s Miami Herald, there is a report of a St. Lucie West homeowner who just received his property insurance premium bill and discovered that it has jumped from $1092 to $2715; the news story does the math – that is a 152% increase for this family, with the bill being due in August.  You can read the full news story online at the Miami Herald’s site, “South Florida homeowners seeing big increases in renewal notices for property insurance .”

How can this homeowner insurance rate hike happen?

The State of Florida oversees insurance companies in the state, and the companies cannot charge just any rate — their prices have to be approved by the state regulators before the homeowner can be billed: insurance companies cannot just pull premium amounts out of a hat.  The Office of Insurance Regulation and laws passed by the Florida Legislature are designed to protect Florida homeowners from being gouged by insurance carriers.

Problem is, since there’s no cap set by the State of Florida right now on property insurance premiums, regulators are approving rate hikes submitted to them almost like they have a rubber stamp.  Unfortunately, there are no big battles between regulators and insurance carriers on premium costs.  Battles like that bring attention to these issues and sometimes help in keeping the parties in check.

How are insurance company’s justifying these increases?

Insurance carriers point to two big reasons for needing to ask homeowners to pay more for insurance coverage here in Florida.  First, hurricanes.  The State of Florida was hit by five category 3+ hurricanes in two years (2004 and 2005), and it’s predicted that Florida is overdue for another big hurricane soon.   Insurance companies in Florida had to pay millions in the aftermath of the hurricane damages, understandably so.

Secondly, carriers have lobbied hard for more money because they’ve been the victims of fake insurance claims and they’ve had to pay out money which was not legitimately owed.  For this reason, among others, Senate Bill 408 (go here for full text) was signed into law last month.

For details on what this new law means to Florida homeowners, read our May 2011 post on its potential impact, “Florida Homeowners’ Insurance Rates May Rise Thanks to New Property Insurance Reform Law Being Passed by Florida Legislature.”

What Can You Do When You Get a Huge Property Insurance Increase?

What about the Office of Insurance Regulation?  They have issued a press release endorsing the passage of SB 408.

The idea that the Florida regulatory agency will be fighting hard for the individual Florida homeowner with a big renewal premium doesn’t seem to be a bright light to follow.  Insurance policies are contracts; for many, the answer may be to challenge the individual policy provisions, request a change to coverage terms, or to simply shop for another carrier.

For instance, you might consider raising your deductible, or combining coverage:  can you insure your home with the same company that insures your car?  That might lower your cost.  There are other ways to lower the premium, which should be discussed in the policy language:  add a sprinkler system, fire alarms, security alarm systems with a central station, etc.

These Property Insurance Premium Increases is The Last Straw for Homeowner’s With Underwater Mortgages

Many Florida homeowners are making mortgage payments every month even though their homes have a fair market value that is much less than the mortgage amount: they have an “underwater mortgage.”  Many are pinching pennies to try to keep their home.   Others are holding on, waiting for the market to bottom out in the hopes that their investment will recover in the long term.  Some Florida homeowners who receive one of these renewal premiums with an increase of 150+%, are deciding that the time has come to walk away from their home.  However, before taking action, they should seek the legal advice from a Florida real estate lawyer with the knowledge and experience in guiding homeowner’s through the foreclosure process. Homeowner’s need to know, for example, that banks are pursuing homeowners who default on underwater mortgages (a.k.a “strategic defaults”).

The bottom line is, underwater homeowners in Florida do not have a lot of good options right now and these insurance increases are only making matters worse.

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