Three Florida counties are among the most vulnerable in the nation for hurricanes and related flooding – Monroe, Miami-Dade, and Palm Beach. Residents in those counties are well aware of the risk, and they are maintaining important flood insurance coverage. But that is not happening in many other parts of the state.

While the percentage of people in Florida with flood insurance is much higher than in other states (for the obvious reason that we have more coastline), there are 70,000 fewer flood insurance policies in force today statewide than there were three years ago. Blame the economy and the volume of foreclosures – or the absence of severe weather to remind people of the power of storm surge. Monroe and Miami-Dade counties are bucking that trend to drop flood coverage with more flood policies in place now than in 2007. Palm Beach County had a slight decline. The National Flood Insurance Program (NFIP) has a report on flood policies in force by county. Florida accounts for about 40 percent of all the policies in the NFIP, and yet studies have shown that only about half of the people living in special flood-hazard areas have purchased a flood policy. There are recent developments with flood insurance worth knowing.    

Hurricane season is rainy season, and some inland rivers are nearing flood stage. The U.S. Geological Survey has a Water Watch map to show which parts of the state are currently vulnerable to flooding.  Since the majority of natural disasters involve flooding, and standard homeowners insurance policies do not cover flood damage, flood insurance provides important protection.

Know your flood risk. Visit www.FloodSmart.gov and learn How the NFIP Works.

When you buy a brand new “smart phone,” or any other high-tech device, you get the most out of it with a thorough reading of the instruction manual. Same holds true with your insurance. Have you read your insurance policy? It’s the manual to tell you how your insurance works. Too many people do not know how much they are insured for, and that’s a problem.

A home is usually your most valuable asset. Property insurance protects that asset. And yet, in an “Insurance Literacy” survey conducted for MetLife Auto & Home, nearly one third of those surveyed said two things of note: They did not know how much insurance they had on their home, and they did not know how much coverage they had for contents.

Many people think their insurance coverage should match the real estate value of their home. That can leave you underinsured. How much insurance you need depends on how much it would cost to rebuild your home. Find out rebuilding costs by typing in “building cost calculator” into your search engine to use one of the free online estimating tools. People also underestimate the value of all the contents inside their home. When you conduct a home inventory, you can match insurance to your contents – and it won’t cost you anything but time. Download free home inventory software from the Insurance Information Institute at www.KnowYourStuff.org.

As we enter the most active phase of hurricane season, you may be interested in the interactive hurricane preparedness program hosted by Pinellas County Emergency Management. The live video program is tonight – Thursday, Aug. 26 at 7 p.m. I will be on panel answering insurance-related questions, along with a meteorologist for the National Weather Service and county experts on emergency planning and building. Check out the event at http://www.pinellascounty.org/etownhall/ or watch it on Bright House channel 622, Knology channel 18 or Verizon channel 44.

Does a hurricane need to make your home a bull’s eye before you prepare? People who prefer being the calm before the storm are restocking their hurricane supplies this week – before weather watches and warning throw everyone else into frenzy. Peak hurricane season starts now.

The American Red Cross has a hurricane preparedness checklist with supplies you should have on hand. Emergency managers have stressed for years that people need to take care of their own needs for at least three days following a major storm. That may be tough for some people this year with the troubled economy. If you are among the fortunate who can reach out to neighbors, maybe you can increase your stockpile for sharing. A disaster supply kit should cover your needs for three days because it typically takes that long for emergency services to get to a storm-damaged scene.

Put a weather radio on your shopping list. These radio receivers will alert you to approaching weather conditions, such as tornadoes that pop up unexpectedly. A weather radio can be a lifesaver, and although the sound of the alarm blaring in the middle of the night has knocked me out of deep sleep, it also reminds me of how smart I was to purchase it. They are available from many retail outlets and online.

Check your insurance policy for the amount of your hurricane deductible. Homes valued at $100,000 and higher have a minimum 2 percent hurricane deductible. Read more on how hurricane deductibles work so you know what to expect if you should suffer damage.  Remember that your homeowners insurance policy does not provide coverage for flood damage, so talk to your insurer about purchasing flood insurance from the National Flood Insurance Program. Some private insurers also offer excess flood coverage if what you purchase from the federal program is insufficient.

Hurricane Danielle is not expected to threaten the U.S., and neither is Earl who is following close behind. But there will be another storm coming, and if it comes this way, being ready for hurricanes is the best place to be.

It’s hard to find much everyone agrees on, but this may come close: Few people are particularly pleased with the homeowners insurance market in Florida – not insurers, regulators, legislators or policyholders. Floridians seem ready for long-term solutions to the property insurance issues, rather than quick fixes. This comes from a recent poll by the Florida Chamber of Commerce and the Property Casualty Insurers Association of America.  

Research findings from a poll of registered Florida voters conducted last month measured public attitudes toward business, insurance and opinion leaders, including voter preferences for governor and U.S. Senator. Voters’ top concerns are the poor economy and jobs, followed by the effects of the oil spill and improving education. So while insurance is not a current top-of-mind topic, when asked which is more important – the long-term stability of insurance rates or immediate rate relief – 72 percent said stability. More than two-thirds of those surveyed believed more competition would help fix Florida’s property insurance problems, rather than more regulation. When asked if people living in coastal areas should pay more for homeowners insurance than those who live inland, 55 percent said yes, while 42 percent said coastal residents should not pay more.

Another finding from the poll is that a majority of Florida voters – 60 percent – are unaware that the state can tax all insurance policies to subsidize the funding shortfalls in Citizens Property Insurance, the state-run insurer. That’s an improvement over the 71 percent who were unaware of so-called “hurricane taxes” back in January 2008, but still a high number. It’s not only Citizens that can levy assessments, so if you want to know more, take a look at this Florida Insurance Assessments paper. If you have property or auto insurance with a private company, rather than the state, you are paying for claims that aren’t you own – and you should know about that.

Experts can predict the weather, but they can’t predict sinkholes. We have more sinkholes in Florida than any other state, and some areas are more vulnerable to sinkholes, such as West Central Florida and Tampa Bay, and they open up when it is very dry or very wet. So, rainy season is hurricane season is sinkhole season.

First thing you’ll want to know is whether or not you live on potentially “shaky ground,” keeping in mind that sinkholes can happen anywhere and occur more often where the limestone is closer to the surface. The Florida Geological Survey has a sinkhole poster that shows the distribution of reported sinkholes in the state. The most dramatic sinkhole occurring in Florida happened in Winter Park in 1981. In just one day, the sinkhole grew to more than 300 feet wide and 90 feet deep – and it kept on growing. Here’s a YouTube video that includes news footage of the Winter Park sinkhole as it swallowed up property and a couple of classic cars. Today, the sinkhole is known as Lake Rose, a natural lake with quite a story to tell.

There are two levels of sinkhole insurance – one that typically carries no additional fee and applies only when the building, in essence, is swallowed by a sinkhole, and the other is more comprehensive to cover sinkhole damage, requiring an additional premium. Florida sinkhole law requires insurers to provide coverage for “catastrophic ground cover collapse,” defined as when all four of these criteria occur: 1.) an abrupt collapse of the ground, 2.) a visible depression appears, 3.) there is structural damage to the property, including the foundation, and  4.) the building is condemned by a government agency. If all four do not occur, such as when there are cracks in the foundation but you can still live in the home, then insurance may not pay for the damage. This is why people choose to buy comprehensive sinkhole insurance which is an addendum to their existing property insurance policy. Consumers have the option to choose the type of coverage they want. Keep in mind that some insurers automatically give you the comprehensive coverage and you have to opt OUT if you don’t want it, while others may provide the coverage that the state law requires and you have to opt IN to get full coverage. Make sure you know what you have by reading your insurance policy or calling your insurer. How much does comprehensive sinkhole coverage cost? Depends on where you live. If you look at the sinkhole poster from the Florida Geological Society and there are no dots where you live, it may cost you pennies a year for comprehensive sinkhole coverage. If you live in Tampa Bay like I do, where there is a sea of blue dots on the poster for reported sinkholes, sinkhole insurance can range from $300-$400 a year.

The Florida Office of Insurance Regulation has said a dramatic rise in sinkhole claims is driving up the cost of business for insurers in Florida. There are people who make money by encouraging homeowners who have comprehensive sinkhole insurance to file claims. When a claim is filed for suspected sinkhole activity, the cost to do ground testing with a geological expert can run $10,000 or more. And, that’s just the beginning, since the costs to repair the sinkhole means filling up an underground hole that is often of indeterminate size.

Fraud is driving up auto insurance costs in Florida. The state’s “no-fault” insurance law is easy money to fraudsters who fake crashes, then send co-conspirators to sketchy medical clinics that bill for services that often aren’t delivered. These scams are getting attention from insurers and the Florida Division of Insurance Fraud — and that’s good news. Last week, Florida’s Insurance Consumer Advocate, Sean Shaw, hosted a Personal Injury Protection Roundtable to bring diverse groups together to talk about the issue.

Personal Injury Protection (PIP) is being exploited by criminal groups, according to state fraud investigators. Also known as no-fault insurance coverage, PIP pays for the driver’s own injuries no matter who is at fault for an accident. It is designed to help reduce the need for Floridians to sue to cover injuries from an automobile accident. They sue anyway, and a Senate report on auto insurance from 2008 offers data on how lawsuits relate to a rise in medical procedures, such as a finding that claimants with attorneys were five times more likely to report MRI (magnetic resonance imaging) charges. If you need an MRI, you should get one – but the report from the Senate stated that its analysis of 2005 PIP claims showed elements of suspected fraud in almost one-third of claims! Wow. Rising claims costs are also attributed to “buildup,” which is when injuries may be exaggerated or reported losses are inflated to drive up the overall cost of the claim. Take a look at the fraud division’s annual report. Page 13 shows a chart for 2008-2009 statistics revealing that PIP fraud comprises 30 percent of its referrals for investigation.

The epicenter for auto insurance fraud in Florida is the Tampa Bay area. It used to be South Florida, and when the National Insurance Crime Bureau and law enforcement got really aggressive with fraud prosecution there, the crime organizations moved. That focus on fraud is coming to Tampa Bay, a good thing for consumers since insurance fraud is not a victimless crime. We all pay the price

As a savvy sale shopper, making a beeline to the 70-percent-off rack is a favorite pastime. I know that most of what I buy on sale still rings in some measure of profit. A retailer can’t expect to be in business long by selling a product for less than it costs them to buy it – but insurers in Florida are expected to do that. Few people want to believe this is true, and the recent property insurance rate increase submitted to Florida regulators by the state-run insurer points out the math problem that comes from denial over how much things cost.

Citizens Property Insurance is the state-run insurance company. It was originally designed as the “insurer of last resort” for people who could not find property insurance with a private company. Today, it is the “insurer of ONLY resort” for many of those who live on the coastline or in older homes that may be too weak to resist hurricane-force winds. With a state law passed in 2009, Citizens cannot raise individual policyholders’ rates in any one year by more than 10 percent. But the actuaries (the “numbers” guys and gals) who work for the state insurer say that Citizens’ rates need to go up 55.9 percent on average. Why, you ask, when we have not had a hurricane since 2005? Citizens said they have been experiencing steadily increasing non-catastrophe losses from…..sinkholes.

Here’s the math Citizens laid out at a meeting of its governing board: In accident year 2009 (Citizens’ fiscal year), Citizens took in $19.6 million in premiums and paid out $97 million in sinkhole-related claims. So, Citizens paid out $774 million more than it took in last year. That’s the story for the state-run insurer – and the same thing is happening with private insurers, which may help explain why few companies want to take on more business. When Citizens pays out more than it takes in, taxpayers make up the difference through assessments levied by Citizens. Here’s an interesting paper on how the assessments work. I’ll have more on sinkholes in an upcoming post.

Why are prices for home insurance not crashing like the housing market? It’s a fair question and here’s the straight answer: You pay insurance premiums based on what it costs to rebuild your home, not on what it might sell for in this depressed economy. And, the perception that rebuilding costs have dropped is not the reality. Here’s a related question: My mortgage company requires property insurance, so why can’t I just get insurance for what I owe on my home loan? Because if you insure your home for only what you owe, you’ll not have enough money to rebuild it.

The cost of home insurance in Florida is a hot topic, and I’ve been reading news articles on homeowners who are unhappy (yes, an understatement) about getting renewal notices on their property insurance that show an increase when they were under the impression that the governor vetoed legislation on rate increases. That’s not what the legislation (SB 2044) was about. It included some reforms that would have helped stabilize the insurance market – which would have helped consumers – and the part that had to do with insurance rates was to allow expedited rate filings so insurers could charge rates that reflected the costs of reinsurance (which is insurance for insurance companies) and inflation. The Office of Insurance Regulation continues to review insurers’ rate filings and approves them when they determine that the data warrants it.

Insurance is about having coverage sufficient to rebuild your home and replace its contents. The National Association of Home Builders has a chart that reflects the median price per square foot to build a new single-family home. The median price for the entire South was $73.59 per square foot. Important note: This is a median price, which means 50 percent of the costs are above it, and 50 percent are below. Obviously, costs per square foot would be higher in coastal areas and big cities. It is recommended that you talk to a building professional to learn more about rebuilding costs for your area or look at one of the online building cost estimators. What homes are selling for is not the guideline to follow.

Xactware is a company that provides estimating solutions for property insurance, remodeling and restoration. They report that overall construction costs were flat in 2009, something that has not occurred in seven years. In 2008, the average cost to rebuild a home rose 3.95 percent nationally. What is confusing most people is the rising disproportion between real estate value of a home and its reconstruction cost. To confuse the two could make you seriously underinsured – and to undervalue the price of rebuilding to cut your insurance costs exposes homeowners to major financial loss.