Much was anticipated when the House voted with a overwhelming 116-2 to cut our insurance rates. The Senate followed by an unanimous vote and approved to curb down an ever growing home insurance cost which was already straining millions of homeowners. These who were hardest hit were of course homeowners along the coasts, who had seen a spike in rates, especially after Charley. With real estate already dropping in sales all around Florida, over 30% and more, with many large developers postponing new projects, large home inventory flooding our counties, rise in concrete and steel for new homes, taxes in numerous counties raising their taxable assessed values, Florida has managed to sell more homes in 2006 then it ever has, except for: (no surprise here) 2005! One cannot deny Florida and the economic growth with a rise from 16.77 million of citizens in 2002 to 18.44 in 2006, a solid unemployment of 3.5% (though I proudly will say that my city of Fort Myers is at 2.5 %), a per capita of $35,000 from $29,000 in 2002. Due to its fiscal discipline, Florida is poised to enter its fifth year of robust ecomic growth. The growth state product is rising at a healthy 6.5% with about 655 milion for 2006 compared to over $500 million in 2002. One knows that many new entrepreneurs are moving to Florida, with a growth of 2.1 % per year of labor productivity.
It is believed that the decline in real estates sales and with it an erosion of home values was indeed a necessary pill to swallow. We do know that home values in Florida had seen an over-the-top appreciation and it was time to readjust these loopy prices and make homes more available to most people, but what about this Insurance rate? They say that most will see a drop in their insurance cost of about 22%. That looks too good to be true and without being a pessimist, I doubt most will see such a drop. What surprised me is how fast Gov. Charlie Crist and the Florida legislature went to work. Most of us had seen an annoying increase in insurance cost of 21% in Jan. 2007 and will see a return to 2006 rates which will be valid throughout 2007.
The State will form a fund which will back up insurance companies in case of Hurricane catastrophes. Something I am glad about as many insurance companies plainly fled the State after Charley. They just left!! There is a trick though, insurance companies will have to "also" pay extra to build up its reserve. Well thank you very much, I am all in favor of insurance companies who "can" cover my home in case of an emergency! That is why we pay for these coverages, now it will be law.
And lo and behold, this will cancel the nifty plan Citizen had, our largest insurance co. in Florida, to raise our cost coverage to 56%. Nice try Citizen but no thanks. The state will also demand that Citizen does not charge rates high enough to buy reinsurance to cover catastrophic losses. The twist: the State is hoping we will not get any hurricanes soon, otherwise, back to back board. Now an interesting law: The State will require Insurance companies to sell coverage which does not cover wind damages. If you feel your home is far enough from the coast line, or that it can withstand 130 mile-an-hour winds for example, then you may have the choice not to get wind coverage. Of course there will be a twist. Many bankers will not want to lend you money if you don't have wind coverage. The answer: pay cash. If you own more equity in your home then you owe mortgage then you may have a chance. If you choose to do so, please make sure your trusses have hurricane straps, buy hurricane shutters (you may buy different panel types yourself, even transparent plastics withholding 130 plus miles-an-hour and metal straps for an affordable price. If you don't know what you are doing, hire a pro to install them but buying them yourself will save you mucho denaro.) Check all of your windows. You will also get some premium credits but you will not see these credits immediately. Chances are, if you purchase a home near the coast and need a mortgage, you will need wind damage coverage.
Good news: The State will also waive the old policy which says that foreign insurance companies had to pay a nasty deposit. I believe that some legislators were out in the sun to long! Sure, firstl, most U.S. companies left Florida, second, we want to charge an extraordinary amount if a foreign company wants to open business in Florida. That makes sense, we need to lure them back. I am sure Lloyd's of London (after Andrew and I am not related) had no intention of coming back to Florida after Andrew cleaned up a huge amount of their reserves. Now if we play fair they will come back. Welcome back!
After all this noise and much expectation the new laws are not perfect but the change is a fresh start. I was a little disappointed to find out that someone who possesses a home assessed at around $250,000, will save only 136 dollars a year. Woopdedoo! On second thought, it is better then a spike of 56%, so we should at least agree that it is a huge improvement. They say that depending on where you are located your policy drop in rate will vary. The closer you are to the coast the more you will see a drop in cost..State Farm promises a drop of 19% in wind coverage, Citizen, around 10%.
More good news: If you are a customer with a smaller company, you may even see a drop of around 25%, plus. Let's be real. Those along the coast will see drops of around 18%, the others. 5%. That is what they say anyway. Of course I am a little skeptical with Citizen's notorious history of poor claims settlement. Oh I forgot, Citizen is a State run insurance company. We also know that with increased zoning codes, builders will raise the cost of a new home.
What to do? Buy a home on the beach or on a canal next to the coast and put it on wheels and roll it when you sign a new policy. What to do? Hire a realtor who can tell you if you are in a flood zone and knows what the DEP is and what is the coastal flood line and can evaluate the elevation of your property. Anyway you can always get an elevation survey. I like to show properties after it rains or at least preview them after a good shower. Yes, realtors need to smell good also.
There is an up side, we will be able to cherry pick much more. The days of arranged marriages or blind dates are gone and I am thankful, we will be allowed to choose our mate. All in all, it's all good news. Regardless of your political affinity, our Governor is starting his term with a high grade. Now I can pass along the good news to my clients. It,s much more fun to sell homes in Florida when the insurance drops. The next owners in Florida will have it much easier.
LLoyd Nichols
Real Estate Network Services
6360 Presidential Court, suite 4
Fort Myers , Florida 33919
cell: 239-810-2980
fax: 239-463-4826
web site: LLoyd Nichols - Fort Myers Beach
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