Seeking warm weather, Debbie and Mark Roman decided recently to move from Pennsylvania to South Florida, and locked into a Coral Springs ranch house for $299,999. The price was right, the pool a plus, and the four bedrooms offer plenty of space to work from home.
But as they prepared to close on the deal and began getting estimates for homeowners insurance, they were taken aback.
“When I got the first quote, I thought, ‘You’ve got to be kidding,’” said Debbie Roman, 43. “I never thought it would be so much.”
Their house in York, Pa., which was larger and worth more money, cost $700 a year to insure. Now, they are going to have to spend $4,000 to $5,000.
“I can see someone getting to this point and not being able to afford the house,” Roman said. “If you live down here, you expect it and you know it, but for us it was quite a shock.”
Even for those who have long lived in South Florida, the envelope harkening your insurance renewal this year may come as an unwelcome surprise, especially if your home is covered by Citizens Property Insurance Corp.
Last September, the Florida Office of Insurance Regulation approved a 10.3 percent statewide premium increase for Citizens, the state’s largest insurer, with 1.3 million policies.
The premium increase went into effect beginning in January and February, on policy renewal dates this year. It was the second increase in two years for Citizens customers, following a three-year rate freeze that ended in 2009.
Homeowners in Miami-Dade, Broward, Palm Beach and Monroe counties, who account for 45 percent of Citizens’ policies, will see increases ranging up to 11.2 percent, according to Citizens’ charts, which break down the state into geographic territories.
Citizens is limited to requesting rate hikes of 10 percent each year, based on a rate cap. The current increase in premiums statewide included additional funds to infuse cash into the Florida Hurricane Catastrophe Fund, which provides back up for private insurers as well as Citizens.
Even as homeowners are just seeing these latest premium increases, new legislation winding its way through the Florida legislature could raise that rate cap even higher if approval comes during the final weeks of the session.
A bill in the House, which would raise the annual cap to 15 percent per policy holder, could go to a floor vote as early as this week.
A bill in the Senate, which would raise the cap to 25 percent per policy holder, but no more than 20 percent per territory, is still in committee.
“Our rate need overall is more than we have been allowed to implement under law, so we continue to need more,” said Christine Ashburn, spokeswoman for Citizens. Because of the rate freezes in 2007, 2008 and 2009, rates have not been adequate since 2006, she said.
In fact, Citizens’ territory charts for South Florida point to “indicated rate changes,” or what Citizens would like to have, exceeding 100 percent increases in parts of Miami-Dade and Broward -- and 184 percent in Monroe.
The rate need is driven by the concentration of exposure and the risk of loss, using storm track scenarios, Ashburn said.
“Think about the amount of risk we have in South Florida,” she said. “It’s significant.”
No doubt for South Florida homeowners, the insurance premium outlook is far from bright.
“The worst is yet to come,” said Lee Gorodetsky, owner of L&S Insurance, an agency based in Fort Lauderdale. He expects to see rates jump 30 percent to 50 percent over the next two years.
Other insurance professionals are also concerned.
“It’s frustrating as an agent, because if 80 percent of the population has Citizens, and they complain about their rate, there’s not much you can do,” said Alex Virelles, owner of Diplomat Insurance, an agency based in Coral Gables.
Indeed, in certain parts of South Florida, particularly east of I-95, where private insurers generally are not writing wind policies, the options are limited.
Yet even Dolores Smerkers, who owns a three-bedroom villa in Davie, may end up with Citizens.
“I’ve been with State Farm for 33 years and they are not renewing me,’’ said Smerkers, 59, a chief financial officer for a non-profit corporation. “And I’m having difficulty shopping.”
She paid $2,700 last year with State Farm, and may now have to pay $3,600 elsewhere when her policy renews in July.
Homeowners may also see Citizens premiums rise as the value of rebuilding their home is adjusted upward, based on an inflation factor, Ashburn said.
“Even though the real estate market has obviously been in a significant downturn, the cost to replace a home has gone up,” she said, citing building materials such as steel.
As partial relief, some homeowners can opt to pay their premium in installments.
Citizens allows homeowners to pay their insurance semi-annually or quarterly. Virelles’ agency will finance the premium over 10 months, at up to 14 percent interest.
Agents say they can also offer reduced coverage, if homeowners desire, such as substituting depreciated cost for replacement cost of furniture.
Deductibles can also be raised from 2 percent to 5 percent, for example, if the mortgage company allows it. But then the homeowner carries a much higher share of the risk in the event of a claim.
Still, for homeowners like the Romans from Pennsylvania, the South Florida insurance landscape poses a harsh reality.
“It’s all confusing and new to us,’’ Roman said. “Back home you could shop around. Here you have no competition.’’