On Tuesday, Oct. 1, premiums for flood insurance were set to skyrocket for many Florida homeowners and businesses. Many fear that the rate increase will hurt residential real estate property values and lower home sales for the areas affected. Florida is the state that will be hit the hardest by the rate hike because 37 percent of flood insurance policy holders live in the state.
Most people affected by the rate increase will only be required to pay a little bit more. However, people and businesses that own property in areas that are at high risk of flood will be forced to pay thousands of dollars for insurance that is required by mortgage lenders. Beachfront property owners and people with residential real estate on riverbanks will likely feel the rate hikes the most.
One insurance agent mentioned that he quoted an insurance rate for a nine-unit condo on Hollywood beach three weeks ago, but the rate hike required him to re-quote the insurance at seven times the previous premium. Three weeks ago what was going to cost the condo owners $5,126 per year will now cost them $36,584 per year. The agent said that property owners are in a state of shock and the rate increases are out of control, unaffordable and people are scrambling because of it.
In the case of the condo owners, their insurance agent said that his customers decided not to buy flood insurance. While many Florida owners of residential real estate will choose to skip having flood insurance and be content with hurricane and fire coverage, other homeowners will be forced to buy the insurance because of the requirements of their mortgage lender. Many politicians and commentators disagree with the rate hikes and call them unfair. However, others are saying that the rate hikes only affect a small percentage of wealthy people who own expensive waterfront real estate.
Source: sun-sentinel.com, Flood insurance rate hikes hit hard in Florida, William E. Gibson, Sept. 28, 2013