Florida Homeowners With Insurance Are Struggling to Get Claims Paid – Why?

According to a recent Moneywise article, homeowners with insurance coverage in Florida are struggling to get claims paid. 

Chad Zalva, a single dad in Riverview, Florida, was cited as an example in the article as a homeowner who is carrying homeowners insurance but was recently surprised to learn that the damage to his home from Hurricane Milton will not be covered.

While his insurer estimated the damage at $2,500, local contractors put the cost at $4,500 and Zalva doesn’t have the cash to cover the repairs to his home. 

Why isn’t the damage covered?

Homeowners insurance has a deductible that the homeowner must pay before coverage kicks in and if the damage is less than the policy deductible, an insurer will deny the claim as the amount the homeowner needs to pay (the deductible) is more than the damage amount. 

In Zalva’s case, he chose a low-cost homeowners insurance policy for its affordability but clearly didn’t understand his deductible obligations. Insurers offer lower premiums for high deductible policies, but these policies do leave homeowners on the hook for a massive deductible if they need to make a claim on their policy. 

“I did go for the lower amount,” Zalva said in the Moneywise article. “Unfortunately, my deductible is outrageous. I was like, ‘This is insanity.’”

His policy deductible was $7,200 which led his insurance company to deny his claim. Zalva is not alone, as insurance costs in Florida continue to skyrocket, many homeowners are finding their claims being denied due to their large deductibles. 

Data from the Florida Office of Insurance Regulation shows that roughly half of all Hurricane Milton claims were closed without payment and over 40% of those claims were closed without payment due to damages being less than the policy deductible. 

As insurance prices in Florida continue to rise, more and more homeowners will most likely be faced with a similar situation.

A lower premium almost always comes with a higher deductible and once a storm hits, homeowners face massive out-of-pocket costs before insurance kicks in. 

Michael Peltier, a spokesperson for Citizens Property Insurance, Florida’s state-backed insurer of last resort said in the Moneywise article, “Typically, hurricane deductibles run 2%, 5%, or even 10% of a home’s insured value.”

This translates into a $30,000 deductible if a homeowner is carrying $300,000 in coverage and has a 10% deductible. Even with a 5% deductible the same homeowner would need to pony up $15,000 before coverage kicks in to cover the balance. 

According to Florida’s State Insurance Commissioner, Mike Yaworsky, says these percentage deductibles are required by law. “The statute actually mandates that there be a hurricane deductible of some kind — 2%, 5%, 10% — on every single policy. And so that’s baked through the entire system,” said Yaworsky in the Moneywise article.

Percentage deductibles are not required in all states but in many severe weather prone states they are becoming more common. 

In the end, it is up the policyholder to choose their deductible amount and fully understand what that means if they must make a claim.

What deductible should you choose?

The answer to that question will vary dramatically depending on your financial situation. While opting for a higher deductible will lower your monthly premiums, it also means that in the event your home is severely damaged or destroyed, you will have to come up with a significant amount of money.

On the other hand, a lower deductible will push up your premium, in some cases making it unaffordable for the homeowner.  

The best advice is to run the numbers and see which option works best for your particular situation. A complete understanding of your policy is also important so that if you need to make a claim, you are fully aware of your deductible and how much you will have to pay out of pocket before coverage kicks in to pay the balance. 

Having an emergency fund in place with your deductible amount stashed away is always a great idea but may not be financially realistic for some homeowners. Even if you are unable to save the entire deductible amount, starting an emergency fund is always a good idea.