Written by: Mike Tonsetic

Johnny Sings the PTA Blues

Sometimes I feel like I shout join a PTA. Why you ask? So maybe I can finally clear that foggy air for the masses. Answer the proverbial Q&A of: ‘How much is John Jr. going to cost me, when I pull the trigger, and put him behind the wheel’? Is trigger-happy Johnny going to blow up your budget, your insurance budget that is…?

Most insurance agents will throw industry BS at you, like the ‘Actuarial U’, or perhaps a lesson in ‘VIN Decoding 101’. But budgets are all about transparency, as so should insurance be. I’m going to keep things real simple for you:

• Budget $1K every 6 months for the next 3 years to add John Jr. to your insurance (if he comes in at $800, give him an extra birthday spanking, and if he comes in at $1200, make him take an extra shift down the corner at Publix)
• Now, if you’re daring enough to equip him with a beater, then simply add the cost of insuring the car to the $1K ex.: $1K + $650 = $1650

Yes, of course there are other factors that can come into play. For example, geography, especially in Florida, is a huge budget consideration. Most people don’t know that Seminole County rates are on average 10% less than rates in Orange County. The average rate per car in Tampa is about $850 every 6 months and over $1K in Tri-County. But again, budgeting for insurance should never be about precision. Contrary to popular belief, it should be about squeezing another dollar in savings either. Insurance budgets should be conservative, and rates will naturally inflate gradually overtime.

Time to Inflate the Life Raft

While were no longer underwater on our homes circa 2008, the Florida homeowners insurance industry is. We suffered a record $1.1 Billion loss during 3^rd Quarter 2020 and we’re paying out about $1.30 on every premium dollar we take in for loss. But enough about the reasons why, because the market’s already been flushed down the toilet for the next 2-5 years. Let’s talk about that insurance budget…

Since most Florida homeowners are insured through a Florida company that probably even starts with the word ‘Florida’ itself, it’s all going to be about geography. Now I know what you’re thinking, just because I live in Central Florida I’m safe, but this couldn’t be further from the truth. In Central FL you need to start budgeting for insurance as if you we’re in Tri-County. Your average mid-90’s home in Orange County for example, is tiering up to an annual premium of $3K if you’re not already there yet. The logic here is, high density populaces equals high predictability of loss. Take The Villages for example, where rates are skyrocketing by as much as 50% per year.

Now, back to your budget. If you can’t do anything, and I can assure you, you can’t, I’m going to tell you what you should do. Budget for your homeowners insurance to increase by 35% next policy term. For year two, budget for another 25%. And for year 3-5 to come, budget for another 10% increase each year. Insurance industry analysts predict that this amount of collective premium taken in for all Florida homeowners will once again stabilize the market. Don’t believe me? Well, let’s talk again in another 2 years and I’ll jus say, “I told you so…”

Since it’s my birthday, the goat speaketh from mountaintop: The next time you need insurance wisdom, don’t allow yourself to be ‘techno-bullied’ by your agent. Don’t ask them to translate the language of the policy gods. Just tell them to speak to you like a human being.

Interested in learning about avoiding junk insurance plans? Check this out.

Click to get your quotes today!