Do You Have Enough Homeowners Insurance for the Next Florida Disaster?

January 15, 2019
Michael Steinger
Property Damage

FAST FACTS

Over ⅔ of U.S. homes are underinsured by 18%, on average
Florida has $714 billion worth of property located within 100-year floodplains
70% of Houston homes damaged by Hurricane Harvey had $0 flood coverage

Homeowners insurance is one of those things that few people actually enjoy paying for but everyone is incredibly grateful to have when the time comes. Of course, no one hopes that they will need to use their insurance policy, but in South Florida it is almost an inevitability. Between hurricane season and other extreme weather, many homeowners in the state may suddenly find their homes damaged or destroyed, only to realize too late that their insurance policies leave them financially stranded.

According to the United Policyholders organization, over two-thirds of all U.S. homes are underinsured by 18%, on average. Looking at someone who owns a $300,000 home, that insurance gap could be enough to leave them on the hook for $54,000!

One of the prime areas people lack adequate coverage is flood insurance. After Hurricane Harvey devastated the Houston area, 70% of homeowners discovered too late that their flood damage costs were uninsured.

Not having enough coverage or the right policy conditions can easily compound the anguish a homeowner feels after a major disaster. They can always turn to Florida homeowners insurance lawyers for assistance with maximizing their claim, but even the best lawyer can’t go back in time to change the types of coverage you signed up for.

To help Florida homeowners out — and to hopefully prevent a financially ruinous discovery after a disaster — they can look out for the following common areas where homeowners insurance may lack adequate coverage.

Flood Insurance in Florida

Without a doubt, flood insurance acts as a major blind spot to many Florida homeowners.

Part of the problem is that FEMA flood maps for South Florida counties like Broward and Palm Beach were updated in a way that the Sun Sentinel says, “eliminated zones where flood insurance used to be mandatory for homeowners with federally guaranteed mortgages such as Fannie Mae and Freddie Mac and replaced them with lower-risk zones where flood insurance is optional.”

Seeing these changes, many Florida homeowners rejoiced that they could reduce their overall premium costs by opting out of flood insurance. However, a comprehensive study of FEMA’s data and methodology found that the current flood maps vastly underestimate the risks to property in South Florida. With about $714 billion worth of property located within a 100-year floodplain, Florida has one of the highest concentrations of property values at risk of catastrophic floods.

It goes without saying that flood damage can all but wipe out a home’s contents and structure. Yet, a typical homeowners insurance policy will not provide coverage for damage from water that intrudes into the home. That coverage gap extends to incidents that include sewer system back-ups, canal overflow, tidal surges, or unrelenting rains.

Currently, the only agency capable of offering insurance for such disasters is FEMA. Their policies can cost $500 or less per year while covering $250,000 of structure damage and $500,000 of residential damage. Just a simple extra policy can therefore protect you when the unthinkable happens.

Getting Realistic Replacement Value Coverage for Your Florida Home

Another common oversight for homeowners applies to their ability to cover the actual costs of rebuilding their home. While most homeowners policies do cover replacement value — as opposed to actual cash value, which we’ll mention in a bit regarding home contents — those replacement values may not reflect current, accurate, and realistic costs for home construction.

Your first step is to contact your insurance agent and verify that all of the details of your home contained in your policy are correct. Verify your square footage, the total number of bedrooms and bathrooms, what type of flooring you have, and any noteworthy architectural details that may add to rebuilding costs.

Also, be sure to mention to your agent any renovations or improvements you have made. The addition of granite countertops to your kitchen, for instance, can easily add thousands of dollars to your home’s replacement costs.

For the best, most accurate information, you will need the help of a professional builder or appraiser. An appraiser can project the replacement value of your home’s structure and finishings, whereas a builder can provide the typical costs for rebuilding per square-foot in your neighborhood or area.

Residents who own older homes also have to keep in mind that they might have to update their structure to code when rebuilding. The costs of retrofitting homes with things like fire suppression systems and modern wiring can easily throw a curveball in your construction costs.

On top of these concerns, you may want protection for the rising costs of inflation (known in policies as Inflation Guard) or the costs of rebuilding when contractors are in high demand. While most policies do account for inflation within standard coverage, accounting for the surge in pricing after a disaster usually must be added on. You can secure a supplemental plan known as “Enhanced Replacement Coverage,” which often covers between 120% to 125% above estimated replacement costs during pricey market circumstances.

Inventorying Your Home Contents, and Deciding on Actual Cash Value vs. Replacement Value

Since making homeowners calculate every penny of value for their home’s possessions is a big ask, most insurance providers set coverage for a home’s contents as percentage of the structural coverage limit. The standard coverage is 50% of the home’s market value, but this amount can be decreased to 25% or increased to as much as 75%.

How do you know if these amounts are adequate? You will have to perform a home inventory. Start by calculating the value of major possessions, such as furniture and appliances. Then, add in the costs of big-ticket items like electronics or expensive statement pieces. After that, you can begin to make broad estimates as to the value of certain furnishings and “cheaper” possessions, like clothing or children’s toys.

Once you have your inventory ready, you can use it to make another big decision: to insure for actual cash value or replacement cost?

Actual Cash Value — The value of the insured object if it was sold used on the market today

Replacement Value — The cost to replace the item completely if bought on a retail market today

As you might imagine, actual cash value (ACV) insures items for quite a bit less since most items depreciate over time. A $2,000 flat screen TV you bought four years ago may only be worth $900 if sold today, for instance. But since you can’t go out and find an equivalent TV for $900 should yours get damaged, you will be left on the hook for the price difference.

Replacement value covers the difference using near-match estimates for the items you own. Should you opt for this type of coverage for your home’s contents, then you will receive a bigger claim amount if your items somehow get destroyed. At the same time, you will be paying higher premiums, so one must weigh the choice carefully.

Getting Help From Florida Homeowners Insurance Lawyers After a Disaster

Even when you have the right type and amount of home insurance coverage, homeowners insurance carriers may not always pay out like you would expect. They may dispute the extent of damage to your home, for instance, or have an unrealistic opinion about the replacement costs of rebuilding. Sometimes, an insurer may even misinterpret a policy, saying you don’t have coverage you know you bought!

In these instances, it can definitely help to have a knowledgeable, experienced legal professional at your side. Florida homeowners insurance lawyers are able to interpret policies, document damages and costs accurately, negotiate with insurers, and represent your interests in court should you have difficulty proceeding with your claim. Homeowners therefore end up having a better chance at retrieving a larger insurance settlement with less personal headaches, in most situations.

If you are worried about your current policy restrictions, want to file a claim with the help of an attorney, or are currently in a dispute with your insurance company regarding a claim, you can seek the help you need today.

Contact Steinger, Iscoe & Greene now to schedule your free case evaluation using our online form or the phone number you see above. Just one call can help you as a homeowner get the peace of mind that comes with knowing you have an expert in your corner, so don’t hesitate to contact us today!