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Soaring costs in the Sunshine State

The Rileys make a fair point about home insurance rates increasing across the board in Florida, even for policyholders with a clean record.

Today, the average cost of home insurance in Florida is $4,419, according to Insurance.com (for a policy with a 2% hurricane deductible), which is well above the national average. Without the hurricane deductible, the average premium is $2,401 — but that leaves homeowners vulnerable to hurricane damage.

There are multiple factors driving insurance costs up.

First, extreme weather like hurricanes, tropical storms and flooding have triggered historically high catastrophe costs in recent years. And with sticky inflation, elevated interest rates, labor and material shortages, the property insurance claims caused by those weather disasters have grown more expensive.

Insurers in the state have also struggled to cope with excessive fraud and costly litigation in recent years, often revolving around bogus property damage claims — although that challenge is improving thanks to recent state insurance reforms.

Up against such challenges, insurers have struggled to run viable businesses in the Sunshine State. Since 2017, 11 companies that offered homeowners insurance in the state went into liquidation, according to Florida CFO and State Fire Marshal, Jimmy Patronis. Those still soldiering on have hiked their rates and become far more selective about what risks they’re willing to insure — and consumers are paying the price.

Facing seemingly never ending rate hikes, the Rileys highly recommend ‘going bare’ on your home insurance, but only if you can afford to do it and are willing to take a risk. Remember, in a hurricane-prone state like Florida, you’re at risk losing your entire home and having to cover total rebuild costs out-of-pocket.

Still, Jimmy Riley said “it’s the second best decision” he’s ever made (with a cheeky glance over at his wife). But this financially risky concept of “going bare” on home insurance is certainly not for everyone.

For starters, most mortgage lenders require wind coverage and flood insurance for properties in high risk areas. The Rileys could only go ahead with this because they’d fully paid off their mortgage.

Commenting on the trend, III spokesperson Mark Friedlander, told ABC Action News: “Look at the big picture! Is it worth taking the risk that you could lose your home, which in most cases is the most valuable asset families have. Can you replace that out of pocket? Nine out of 10 homeowners absolutely cannot.”

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Reduce the costs of your insurance

Rather than ditching home insurance altogether — or getting a bare bones policy like the Rileys — the III suggests many other ways to lower your home insurance costs.

For instance, don’t just settle for the first home insurance quote you get. Shop around and compare multiple options to find the best coverage and the best price for you.

You could also raise your deductible, which is the amount of money you commit to paying toward a loss before your insurance company starts to pay a claim. With this option, you need to ensure you have enough emergency savings to pay your deductible and weigh up the financial pros and cons before making an insurance claim.

The Rileys, for example, originally had a $20,000 hurricane deductible on their home insurance, and as Jimmy pointed out: “If a hurricane hit and it caused $25,000 worth of damage, are we going to put a claim in for $5,000? I don’t think so because then they’re going to raise my insurance.”

Beyond that, you may be able to secure discounts if you bundle your home and auto insurance with the same insurer or if you take steps to improve your home security and mitigate weather-related risks.

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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