Hurricane Debby made landfall in Florida on Sunday before moving up the east coast as a tropical storm. The National Centers for Environmental Information estimates that the storm caused $3.5 billion in damages. Given Florida’s sensitivity to natural disasters, it’s no wonder that the state has the most expensive homeowners insurance rates in the country. However, the magnitude of premium rises has left even multimillionaires stunned by sticker shock.
Suze Orman, a personal finance expert, recently discussed her experience with Florida’s insurance market. Despite having a net worth of $75 million, Orman was astonished to receive a $28,000 annual insurance premium for her Florida seaside condo. “$28, 000 for a 2,100-square-foot condominium? “Are you kidding me?” she asked in an interview with Dailymail.com, emphasizing the gravity of the issue for Florida citizens.
Not only is the cost prohibitively high for the home’s square footage, but there is always the possibility that the claim would be refused. “I’m not paying $28,000 a year when the insurer will probably contest any claim I get anyway,” Orman noted in the interview.
She went on: “Luckily, I have the money to self-insure.” As she has previously stated, she is a “very, very wealthy woman” who dislikes squandering money on some things.
Self-insurance is when an individual or organization sets aside funds to cover possible losses rather than acquiring insurance from an outside provider. While this alternative may work for the very rich, such as Orman or the late billionaire Charlie Munger, who advocated for self-insurance when it was inexpensive, it is not a practical option for the majority of property owners.
Most Florida residents are required to have homeowner insurance, making it more than simply a wise financial option. If you have a mortgage in Florida, insurance is required to protect the bank’s interest in your home. This requirement places many homeowners in a difficult position, forcing them to pay exorbitant premiums or risk losing their homes. If you own your home without a mortgage, you are not required to have insurance. However, it is highly recommended for your safety.
Rising insurance costs affect not only homeowners, but also the entire housing ecosystem.
Homeowners are being hit the hardest. People’s insurance bills have tripled or quadrupled. Citizens recently announced a 14% rate increase in June, which will take effect in 2025.
First-time homebuyers have it tough, too. It’s difficult to get a foot in the door with sky-high home prices, mortgage rates, and now insurance costs. Insurance can reduce your purchasing power, particularly if you live in a risky area.
Sellers are not immune either. Buyers are considering the overall cost of ownership, including insurance. So they’re not willing to pay as much for a house. This results in lower selling prices and residences sitting on the market for longer.
You’d think renters would be OK, but they’re getting caught in the crossfire. Landlords are passing their higher insurance costs onto tenants through increased rent. It’s just another expense renters have to deal with.
You’re still not completely off the hook if you live in a safe area. Insurance companies spread their risk around, so everyone’s premiums increase slightly. It’s a domino effect.
When even millionaires like Suze Orman are stunned by insurance prices, it speaks volumes about the severity of the situation in Florida. Whether you’re a current homeowner, a prospective buyer, or someone considering self-insurance like Orman, it’s a good idea to consult with a financial advisor who can help you make informed decisions based on your specific circumstances and risk tolerance.