How Does Homeowners Insurance Work?
In general terms, consumers pay a licensed insurance agent for a policy that covers their home (among other things) in the hopes they never have to use it. Insurance does not cover normal wear and tear to a house, and if a system in the house (i.e. roof, air conditioning, etc.) is at the end of its designed useful life, you may be required to replace it or pay more for the risk of keeping it. If ‘a disaster, theft, or accident’ happens to the house (or covered contents), the policy holder can file a claim with the insurance company and ask them to provide resources (contractors or money) to repair the damage. What damage is covered and at what level (replacement or fair market value) and how much (only the mortgaged amount or the whole building) are all decisions consumers make when they purchase that policy. If you want to cover and protect something that is outside the ‘normal’ policy, you can add what is called a ‘rider’ to the policy for that particular item (motorcycle, guns, barns, antiques, etc.) or event (hurricane, sinkhole, flood, etc.). Florida insurance, on average, is higher than most other states (sometimes Oklahoma or Louisiana will beat us). The average policy in the state is over $2,000 a year. Tallahassee averages much less than that.
When you shop for insurance coverage, the costs depend on your characteristics, age and condition of the home, the deductible (like a co-pay in health insurance), and how much coverage you want. Below is what is included in homeowners insurance, and what it includes:
- Dwelling Coverage - covers the house itself, attached structures and built-in appliances and coverage is limited to replacement costs.
- Other Structures - portion tells you whether any other buildings on your property are included – like a shed, unattached pool house, barn, etc.
- Personal Property - covers the costs of damaged or stolen personal belongings including laptops, clothing, art, musical instruments, etc.
- Additional living Expenses - covers the costs of rentals, hotel stays, restaurant meals, etc. if your house is unlivable after a covered event (like a hurricane or fire).
- Personal Liability - covers legal and medial expense if a family member is held liable for injuries to another or damage to a property.
- Medical Payments - is intended to cover minor medical bills to a guest injured on your property (regardless of who’s fault) in order to keep you out of court.
Coverage for any of these items can generally be increased or decreased with riders to the policy.
When buying a home: After you have negotiated the house you like, start shopping the homeowners’ insurance policy around to 2-3 agents. IF IT IS HURRICANE SEASON, do this right away. If we end up in the hurricane box, insurance companies stop writing policies and that could delay your closing even if the storm never reaches us in Tallahassee. The premium will be based on both the characteristics of both the house and the buyer. Insurance agents will have access to previous claims (in most cases) filed on the property and various insurance companies each with several options for coverage. Each company and agency will have different rules for estimating their risk when insuring your home, so it may be worth the time and effort to have the policy quoted by a couple agents from other companies.
When selling a home: After the property is closed and ownership has transferred to the new buyers, call your insurance agent, or company and terminate the policy. Usually, they will send you a check for a pro-rated portion of the premium.
Are Homeowners Insurance and Hazard Insurance the Same Thing?
Yes and no. For the purposes of buying and selling a house, yes they are the same thing. Technically, hazard insurance is one piece of the coverage of your homeowners insurance. If you hear someone ask you about your hazard insurance during buying or selling a home, they are referencing your homeowners insurance policy.
Are Insurance Claims Public Record?
No. However, if you are obtaining insurance for a home you are purchasing, you may be able to obtain the claims report for that property.
What Kind of Policy do I Need?
There are actually eight types of homeowners policies. This is a conversation to have with your insurance agent and your family, you are likely looking HO3 or HO5 coverage. Here is a quick review of the types of policies:
- HO-1– These were basic and limited policies for single-family homes and are mostly nonexistent today.
- HO-2- A more common policy and coverage is broader than the HO-1.
- HO-3 - The most common type of homeowners insurance policy.
- HO-4– Also called renters insurance.
- HO-5- The most comprehensive form of homeowners insurance and the second most common policy type for single-family homes.
- HO-6– Also called condo owners insurance.
- HO-7 – These policies are for mobile or manufactured homes.
- HO-8- A special policy mostly used for older homes that would be difficult to impossible to replace.
What am I Required to Cover With Insurance?
To qualify for the mortgage, you will be required to cover the lenders risk and cover the amount owed on the note. You may also want to consider covering any outbuildings, expensive toys, jewelry, etc. Please talk to your agent about all your risks and cover what is most valuable to you and your family. The top risks we face in Florida are wind damage, flooding, and sinkholes.
Am I Required to Purchase Flood Insurance?
Depends on the house and what your lender and insurance agent say. Most homeowners’ insurance policies do not cover damage caused by water from outside the home. Nationwide, flood insurance costs under $600yearly. If you live near water, or more importantly, in a flood zone, your lender will likely require you to carry flood insurance. There can be a waiting period for the policy to take effect, make sure you ask your agent about that. You can check the flood zone two ways in Tallahassee.
- You want your house to be in flood zone X, B or C, meaning it is in a ‘preferred’ flood zone and insurance wouldn’t be required by your lender. If it is in an A, AE, V, AO or any other flood zone, the lender will likely require flood insurance because you are in a zone where the change of flooding is 1% or more each year. On the color-coded maps, red means high hazard flood zone and flooding potential greater than 1% per year. Investigate your (potential) house here: www.floodfactor.com
- Surveyors, in addition to marking the corners of your lot, can also tell you how high your home is and its likelihood of flooding. This report is called an elevation certificate and is good for as long as the house stands. If you have one, or have to pay for one, keep it handy when you go to sell for the next buyer.
Are Insurance Rates Going Up?
Yes, and requirements are getting stricter. Insurance rates (premiums charged to the customers) are dependent upon:
- Location of the house
- How much is expected to be covered from loss
- How old the home is and how it was constructed
- Buyer’s claim history
- House’s claim history
- Area of town’s claim history
- Buyer’s credit history
Since Florida is hit with hurricanes yearly, there is more risk your Florida home will suffer a wind or rain event and the insurance companies have priced accordingly. If you plan to purchase an older home, your insurance company will check the quality of construction with a “Four Point Inspection” from a qualified inspector (at your expense). Most insurance companies require that hot water heaters not be past their life expectancy. Seems reasonable they would only insure for the life the manufacturer expects the water heater to live, until you must replace a working hot water heater just because it is old. Being old now, I object.
Can a Insurance Company Drop You as a Customer and End Your Coverage?
Yes. We saw this across the state after hurricane damage put several insurance companies in danger of bankruptcy. They can also require that you make certain repairs to retain your coverage as well.
How is Homeowners Insurance Paid?
If you are closing on your home, some (or all) of the premium for your first year of homeowners insurance coverage will be collected at closing. You will also notice that part of the payment you are making on your house monthly will include insurance. This money is collected by your lender and placed in an escrow account. At the end of the year, your homeowners’ insurance premium is paid by the lender. If there is not enough money in the account to cover the premium, you will be asked to contribute towards the escrow to make sure that does not happen again. This is the same with taxes.
How Can I Lower my Insurance Premium?
Ask your agent about specific discounts you or your home may qualify for and if you upgrade any system in your home, call your agent to see if you qualify for a lower rate. Some things that may help:
- Get a Four Point Inspection for an older home to see if it qualifies for discounts based on building materials or quality of construction (like hurricane clips, or house screws).
- Replace your hot water heater.
- Sometimes security systems will qualify for a discount.
- If you have never filed a claim, you may qualify for a discount.
- First time homebuyers may also qualify for a discount.
- If you have a water detection system, you may save both the insurance company and yourself money.
Can the Premium for Insurance be Included in Monthly Mortgage Payment?
Yes, and in most cases, it will be required to be included in your monthly payment.
What Insurance do I Need?
This is a conversation to have with a trusted agent. Be sure to ask your agent if you are covered in the event of a: hurricane, windstorm, flood, sinkhole, and dog bite. Be sure to cover any expensive toy you have – like motorcycles, camera lenses, electronics, etc. You might also be able to save money if you bundle your insurances with the same company. So, if have been putting off getting that life insurance policy, now is the time because you are not getting any younger and your costs will continue to increase as you get older.
What Does Homeowners Insurance NOT Cover?
Anything not specifically mentioned in your coverage paperwork. Insurance companies will not pay for normal wear and tear or neglected maintenance issues. If there is a pipe in your house that has been slowly leaking behind the wall for some time, but only becomes noticeable when find water on the floor and move the fridge, then the damage *may* be covered. This is a conversation to have with your agent. They will know about a company’s reputation of paying or denying claims.
What Can You do if the Insurance Company Will Not Pay a Claim?
We hear this question all the time. Here’s the advice we get from agents:
- Read your policy and understand what is covered and what is not covered.
- Contact your agent and calmly ask how to appeal the decision.
- Consider hiring an independent insurance adjuster.
- Contact the Florida Office of Insurance Regulation (https://www.floir.com/)
- Hire an attorney and file the complaint.
When is Homeowners Insurance Required?
There is no Florida statutory requirement to carry homeowners insurance, but your lender will require you to cover their loss as part of the rules for borrowing the mortgage. If you pay cash for a property, you do not have to carry homeowners insurance. You should, but you are not required.
Can You Get Insurance for Older Homes?
Yes. They can be a challenge, especially if the cost of replacement is difficult or impossible to calculate. Getting a “four point” inspection will tell you and the insurance company what the house looks like as far as risks to loss go. Replacement may not be an option when insuring the antebellum homes we have here, so talk to your agent and ask what they suggest.
What Do I Need to Know About Homeowners Insurance in Florida?
If your home is over 30 years old, you may be required to obtain additional inspections for the insurance company from a licensed inspector. A ‘four point inspection’ costs about $100-$200, and involves taking pictures and documenting construction materials and quality. The ‘four points’ are the heating/air conditioning system; plumbing system, electrical system, and the roof. There may be discounts available depending on what is recorded on the report. The insurance agent may also ask you for a ‘wind mit,’ which is the jargon we use to refer to the wind mitigation report. This report also runs about $100-$200 and is specifically looking at the roof and its quality. There are seven questions the inspector answers and based on his answers you may earn credits for insurance discounts.
Are There Special Restrictions for Insurance Near Water?
If you have a mortgage, you may be required to carry flood insurance.
Can You Get Insurance With a Pool? Or a Trampoline? Or with Knob and Tube Wiring?
Sometimes and it depends on the company, the house's characteristics, and your background. Once, as a practical joke, I sent an insurance agent a photo of the knob and tube wiring (and the newspaper laying near it) we found during an inspection and said that the house had an electrical system with decades of proven performance. That agent still has not forgiven me. Yes you can usually get homeowners insurance as long as you are willing to pay the premium. They may offer an outrageous premium or require additional hoops to jump through, and it can be difficult to find an insurance company willing to take the risk.
Is Homeowners Insurance Required if You do Not Have a Mortgage?
No. There is no state law requiring homeowners insurance. It is a good idea though.
Does Home Insurance Cover the Contents of my House, Like my Clothes, Laptop, Bedding, Jewelry, Things?
Every policy comes with some coverage of the contents of the house. If you have expensive tastes or hobbies, you may need an additional rider to cover the valuables you want to insure. Talk to your insurance agent.
What is the Difference Between Homeowners Insurance and Mortgage Insurance?
Homeowners insurance protects the mortgage company and the homeowner from unexpected loss. Mortgage insurance protects the mortgage company in case the homeowner defaults on the loan and stops paying monthly. By the way, if you do not pay your mortgage, your insurance may end up getting cancelled if they do not receive a payment. In this case, the insurance company may pick a policy for you and pass along this great cost to you.
What is the Difference Between Homeowners Insurance and a Home Warranty?
Homeowners insurance protects the mortgage company and the homeowner from unexpected (and often catastrophic) loss. The home warranties will cover repairs to some appliances and replace them even in the case of normal wear and tear or age. Some home warranties companies are better than others.
What is the Average Cost of Homeowners Insurance in Tallahassee?
The average cost in Tallahassee that I have seen is right around $1,500 depending on the size of the house, construction type, mortgage, etc.
Is it True That Getting Insurance Will Require a New Hot Water Heater?
Insurance companies are looking at hot water heaters closer now and if it is older than 15 years, you will likely be required to replace it, even if it is working properly.
Is There an Inspection Before You Are Covered by Homeowners Insurance? Will They Ask to See the Inspection Report?
Some insurance companies will provide their own inspections and/or inspectors. Most insurance companies do not want to seethe (often very long) home inspection you will receive. They may ask for your inspector to provide them with either a 4 point inspection or a wind mitigation inspection of the roof. If you do not provide this report, they may send their own underwriter/inspector to the property after closing to confirm the condition of the home. If they do not like what they see, you may be required to make a repair or replace an old system.
Does Insurance Cover Dog Bites?
Maybe – A lot of companies do not cover it at all and many companies have a smaller limit like $25,000. Only a few cover animal liability up to the normal liability limit. Even of those who do have some coverage, a lot of those have exclusions for specific breeds (and other animals too) even if they offer some level of liability coverage. Be sure to talk with your agent about how to make sure you are protected.
What Do I Do if I Cannot Find Homeowners Insurance?
If you are a bad credit risk, or your home is a large insurance risk, finding affordable coverage may be difficult and you are not alone. In fact, after the hurricanes hit Florida with a vengeance in the early 2000s many insurance companies stop writing homeowners insurance in the state and many residences were left scrambling to find coverage. There is a quasi-state run company that will provide homeowners insurance for you. Citizens was created by the Florida Legislature in August 2002 as a not-for-profit, tax-exempt, government entity to provide property insurance to eligible Florida property owners unable to find insurance coverage in the private market. They are expensive, and if the storms barrel through our state like they did in 2015, their policy holders may be assessed to cover their costs. Ironically, many, if not most, of the policyholders are not Florida citizens. Citizens can be found here: https://www.citizensfla.com/
Who Do I Call for Homeowners Insurance in Tallahassee?
We are so glad you asked that question. Here are our top three insurance agencies and agents we have used in the past.