FIXING HOMEOWNERS INSURANCE: PART I
The Country Home Insurance Trap
I live in out in the country. This means having a rural homestead that normally would be far removed from city services. The house is located in a wooded area with no fire hydrant nearby other than what is out on the main highway approach. There is a fire station within striking distance and the firetrucks have access via a county maintained dirt road. Fortunately, none of the surrounding trees on my lot are close enough to cause any damage by:
- Their collapsing on top of the roof or walls when hit by a hurricane or even high windy conditions.
- Falling over when the soil around their root base is softened by heavy rainfall.
- Easily transferring fire from burning branches onto my house that is caused by lightning or a careless person’s cigarette.
On the positive side:
- I am close to a hospital
- The offset surrounding trees do protect me against high winds that might otherwise cause the kind of damage you might expect when your homestead is exposed in an open plain or desert environment.
- The roof is fireproof metal as is the skirting around the base
- The lot and surrounding area slopes down into a surrounding valley so there is no chance of floodwaters building up.
To get an insurance policy on my home, my agent had to search far and wide. It was difficult to find a company that would even quote me for the area where my home is located. She finally came up with a company that charged me $2,400. for the first year of coverage.
The policy included a hurricane deductible amount of $4,400. That means the replacement coverage starts after that figure is exceeded for repairs. That was the most I had ever paid for any house that I owned beforehand, so, needless to say, it was an exorbitant amount of money!
For comparison, my daughter bought a home in the mountains of Tijeras, New Mexico shortly after I bought mine. She was charged only $600 for insurance coverage for a similar sized home (it has smaller square footage but does have a separate guest house on site), far from even basic services as well. She is so remote that she can’t even get a decent cellphone signal and had a landline installed.
Location Is All Important As Far As I Am Concerned!
With all that said, the bottom line is that it really depends on where you live. So I set out to find ways to cut the cost on that gruesome expenditure, an amount which added $200. a month to my house payment which was a PITI Mortgage Loan (Principal/Interest/Taxes/Insurance). When the policy came up for renewal the following year, I had my agent do another search. She looked for any new insurance company participants that were now serving my area that weren’t available the year before. It turned out she found a firm called Florida Specialty Insurance Company.
Their quote and subsequent coverage slashed my cost down to $1,600. for a year of coverage. This was still high, but saved me $800. That translated to a monthly cost that was brought down to $133.33. The deductible for hurricane coverage was still high at $4,400 per incident, but that preset amount is controlled by the State of Florida. However, I can live with that scenario since I have already been through 2 hurricanes in the area (including Tropical Storm Alberto as I write this blog), and received no damage from any of them. There is no flood insurance coverage as part of the deal, but I don’t need it because water buildup on my property is not a factor.
UPDATE: The following year, after writing this article, Florida Specialty Insurance Company (FSIC) raised my rates by $69. for a total premium payout for 2018/2019 of $1,669. That was okay because I expected a small increase anyway. It amounted to a monthly addition to my mortgage payment of little over $5.00. But now I was concerned about the potential increase that might affect my rate for the 2019/2020 premium.
What upended the apple cart was the rate I found myself being charged for the following year (2019/2020). When I got the bill, I was shocked to discover the yearly stipend jumped up to $2,564, an $895.00 per year increase. That meant a substantial increase to the inclusive escrow withholding charge that is part of my mortgage payment which amounted to a little over $74.00 a month. This tabulates to a 13% addition to my monthly outlay.
I remember getting a competitive quote from the Florida Farm Bureau that was comparable in price to the original FSIC rate. Since the rate was so close to that of my existing policy, I chose not to make the transfer at the time. But after Hurricane Michael hit our area in 2018, I was getting nervous and requested another quote from them.
The new quote came in April of 2019, and wow! It jumped up too, hitting a figure of $2,545. That increase made me realize the recent hurricane (Michael) was seriously affecting the new pricing of all the known insurance providers for my area. The bigger problem was that I was receiving bids from other carriers that were even higher.
So I tried one more time to locate a reasonably priced insurance provider online. Fortunately, I located a website run by a broker situated in Chicago that gave me the pricing I was looking for. The name was KIN Insurance and they provided me a new policy from a company in Deerfield Beach, Florida called People’s Insurance Trust. That price turned out to be $1,597, and the coverages exceeded those spelled out by FSIC.
The point here is the fact that you never should give up. Keep looking until you find a solution that meets your needs. It is never too late.
The Quest For Future Cost Reductions
The inclusive details of how my policy costs are calculated are broken down to show me where I can save additional money in the future. I had the home inspected professionally while I was back home in Ft. Lauderdale (before I even saw the interior myself) and he said he could do a wind mitigation review of the house. That means he provides an additional review (for an added cost) which focuses on specific items that would help a home withstand damage from hurricane force winds and rain such as:
- Window protection
- Entry door design
- Hurricane strap tie downs
- Roof construction and coverings
Compliance with any or all established testing standards would help further reduce my insurance costs. But I would have to install hurricane straps from roof rafters to wall framing to get a favorable rating for that issue. Any hope of getting that done is negated by the fact that the cost and work involved would not be worth the trouble.
Since I live in hurricane country, protecting doors and windows from wind and flying debris can be a big factor. I have been through 8 hurricanes so far, and that includes Katrina. During those storms, I have watched damage take place all around me. At my home in Wellington (West Palm Beach), Florida, I watched shingles being torn off my roof, front doors blown open, my long fence go down 3 different times, and flood waters creeping up to my door steps. At this point in my dialogue I probably am inviting the question: “Why didn’t you evacuate?” Because I have always been able to calculate the risk of riding out the storm against the possible damage caused if I vacated the house. Besides, I absolutely hate the idea of being stuck out on the open road, buried in crawling traffic, while having the storm bear down on me before being able to fully clear out of the danger zone.
Getting back to the topic of protecting the openings in a house, corrugated aluminum shutters are an option. I could do that to cover all openings here at my current house, and that would save me about $15 to $20 per month. But I will probably opt for plywood panels which can attach with special clips available at home improvement centers. My goal is to get down to around $100. of insurance coverage expenditure per month. This is still high, but manageable within my limited budget.
As time goes on, I will explore further cost reductions with other providers because I still consider $1,600 a year excessive. But for now, after dealing with this homeowners insurance issue, I felt I could move forward and search for cost savings in other areas that greatly affect my budget. So, my next goal was a successful reduction in my property tax rate, a topic I will address in a follow-up article.
I am requesting that my readers click on the links provided and download a sample read of each book and give a review on Amazon. You will have free access to the first four chapters of each book. My hope is that you will like the story lines enough to obtain either an eBook version or a paperback copy that you can put on your bookshelf as a masterpiece when you are done. FATE STALKS A HERO I: RESURGENCE, FATE STALKS A HERO II:THE FIJI FULCRUM, and THE SAGA OF HERACLES PENOIT. I will be giving excerpts on these works in upcoming blogs to familiarize you the reader with exciting details about the contents of each one. Thank you!