Written by: Mike Tonsetic
Whether you’re a new Floridian transplant or practically native by now, and let’s not forget about our snowbirds, the FL homeowner’s insurance market can seem as foreign as a Greek fisherman explaining quantum physics.
What were going to do for you here is briefly highlight the important things you need to know to better understand the complexities of the FL homeowner’s insurance policy.
- There are 6 major coverages, (4) pertaining to the property & usage and (2) pertaining to liability. Let’s break these down real quick:
Property & Usage:
- Dwelling: Insures the ‘shell’ of the house and everything not nailed down (roof, walls, flooring, fixtures, etc.)
- Additional/Other Structures: Covers any structure not attached to the main house (shed, guesthouse, unscreened swimming pool, etc.)
- Personal Property/Contents: Anything not nailed down (furniture, appliances, entertainment systems, etc.)
- Loss of Use/Additional Living Expenses: If your home is deemed inhabitable due to a loss (fire, sinkhole, hurricane, etc.) this covers your living expenses for the interim (rents, hotel, meals, etc.)
- Personal Liability: Insures you against lawsuits for bodily injury and extends worldwide (defense costs, wrongful death, permanent injury, etc.)
- Medical Payments: Covers medical bills for non-resident relatives (ambulance, ER, etc.)
Now that you understand the essential guts to the FL homeowner’s insurance policy, let’s dive just a little bit deeper into some of the caveats & recommendations:
Dwelling: ALWAYS insure for 100% Replacement Cost, which is the true cost to repair or rebuild your home (demolition, labor, supplies, etc.). Replacement Cost is based on current construction industry costs and has nothing to do with Market Value or Purchase Price. $150 per sq. ft. of living area is a good place to start right now and the more customized the home, the higher dollar amount per sq. ft. warranted
*The slab and land are NOT insurable
*Coinsurance Clause states that if you do not insure your home for at least 80% or more of the true Replacement Cost value, then your coverage could change to Actual Cash Value. YOU DO NOT WANT THIS TO EVER HAPPEN!
- Ordinance or Law: Insures the home for additional costs associated with upgrading your home to meet current code. The older the home, the more likelihood of having to use this coverage. Common limits are 10% for new construction, 25% is the average, and 50% for older homes.
- Screen Enclosure/Carport Coverage: Most policies EXCLUDE wind coverage for these structures unless you buy back the coverage. Common limits are $10K, 15K, 25K & 50K. ALWAYS overestimate because costs will always inflate after the storm.
- Water Back-Up: Always pay the $25 or so for the additional $5K in coverage because the last thing you want during a hurricane is to not have coverage for the toilet overflowing from a sewer backup.
Additional/Other Structures: Coverage is often based on Actual Cash Value. Common limits are a percentage of the Dwelling Coverage such as 2%, 3%, 10%, & 20%. You can also buy additional coverage sometimes over those limits, for example if you had a large, detached garage, a barn, or even a boathouse.
Personal Property/Contents: ALWAYS insure for Replacement Cost or run the risk of pawnshop prices for your worldly possessions. Common limits are 25%, 40%, 50%, & 60% of the Dwelling Coverage.
*Property such as cash money, jewelry, guns, antiques, business property, etc. will have VERY LOW coverage sub-limits ($1K, 2K, 5K, etc.), but you can buy back coverage.
*Property AWAY from the property (travel, storage unit, etc.) usually has a 10% max sub-limit of the Personal Property coverage limit.
*The burden of proof is on you, so save those receipts and take a home inventory.
*Some policies will change to Actual Cash Value if you choose a limit below 40%. You never know what you have until it’s gone, and it’s ALWAYS more than you expected.
Loss of Use/Additional Living Expenses: Usually built in for 10% or 20% of the Dwelling Coverage. Choose at least enough coverage to rent a home for 12-18 months while your home can be repaired or rebuilt. For example, if your home is only insured for only $150, you may opt for 20% or $30K to cover rents for a year.
Personal Liability: Common limits on the homeowner’s insurance policy are $100K, 300K, and $500K. ALWAYS choose the MAX! It will cost you a few dollars to!
*Diving boards, trampolines, skateboard ramps, etc. are usually EXCLUDED.
*Animal Liability is usually either EXCLUDED or offers a buyback of $25K.
*If you have a swimming pool, buy a Personal Umbrella!
*Remember statistically friends & family are the first to sue!
*Add Personal Injury coverage of $15-25K just in case your kid turns out to be the school bully.
Medical Payments: Common Limits range from $1K-10K. ALWAYS MAX out, it will go a long way in possibly preventing a lawsuit and costs a mere few dollars.
All Peril: This deductible applies to any loss that isn’t a hurricane, so Fire, Lightning, Water Damage, Theft, etc. are common losses where this deductible would apply. Common deductibles are $500, $1000, $2500, & $5K
Hurricane/Named Storm/Wind: This one can be tricky even for the native Floridians familiar with their homeowner’s insurance. This deductible applies to ‘named’ storms, meaning NOT ‘Tropical Depression 1’, but Tropical Storm Adam, or Hurricane Betty. This deductible is also a calendar-year deductible, so it ONLY applies once per year if you meet. Common deductibles are $500, $1000, 1%, 2%, and even 5% or 10% for coastal properties.
*Percentage deductibles are percentages of the Dwelling Coverage A
*Choose a deductible that you can tolerate, but not one that preempts you to file frivolous claims just because you have insurance.
Even though our 5 minutes are up, don’t take this very brief lesson & advice as the be-all/end-all of insurance knowledge, but should give you a decent foundation to start, and should evoke some more Q&A. Remember, no single shoe fits all, so ASK questions so your agent can build a homeowners insurance policy that will work for you…
Download PDF of the most common underwriting issues we see in Florida:
Insurance Underwriting Guidelines
Read our blog: ‘NO…You Can’t Rebuild for That’ to learn more about replacement cost and why it is vital to your policy.
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