Homeowners hit with higher insurance premiums
http://www.sun-sentinel.com/business/fl-florida-insurance-rate-hikes-20100709,0,6972239.story
Warren Kurtzman was elated when Gov. Charlie Crist vetoed legislation last month that would have made it easier for insurers to raise property insurance premiums.
That’s why it came as a shock when his insurer, HomeWise Insurance, informed Kurtzman two weeks later that the premium on his Delray Beach condominium unit is increasing by 42 percent – from $609 to $864 – this year.
“I thought [the veto] was the greatest thing in the world,” Kurtzman said, “and all of the sudden, I get this [notice] and I almost choked!”
Despite Crist’s veto, and four relatively quiet hurricane seasons, thousands of Florida residents are experiencing similar rate hikes this year. The reason: Crist’s veto doesn’t end rate increases – they’re still allowed for some reasons, with state approval.
In the past 12 months, the Office of Insurance Regulation approved about 140 residential insurance rate hikes, ranging from less than 1 percent to 29 percent. Some individual policy holders’ bills went up more because the approved rate increase is a statewide average.
The increases were approved after many insurers argued that efforts made by the state Legislature to cut premiums in 2007 and 2008 had left them unable to keep pace with claims and other costs. Lawmakers were pressed to act after policyholders experienced huge increases in premiums – doubling and tripling in some cases – after Hurricane Wilma in 2005 and other storms.
Last year, Crist signed legislation that made it easier for insurers to boost premiums as much as 10 percent annually to pay for certain backup coverage costs. About 22 of the 140 increases were filed under that law.
Regulators say there are deeper problems with the property insurance market, including the development boom during the past few decades and, in turn, an increase in the possible damage that could result from a major hurricane.
As homeowners’ policies come up for renewal, they are learning that their rates are rising. Some say they feel helpless dealing with their property insurance, which is required by most lenders.
Karen Leshin, of Weston, said her State Farm property insurance premium increased 60 percent, from $3,198 last year to $5,110 this year. “How is it possible?” she said. “We’re kind of caught between a rock and a hard place.”
Leshin said she wants to move out of Florida due in part to the cost of insurance. But like many other Floridians, her home isn’t worth close to what it was when she and her husband, a retired airline pilot, bought it. She said they have bought State Farm policies to insure their home and cars since 1971. Before paying the higher premium, she said she tried shopping around but found other insurers charging about the same.
“I guess they all got the memo,” she said.
Kurtzman said he plans to shop around. He said he can’t afford a dramatic rate hike because he’s on a fixed income after retiring from a career in finance: “I’m getting killed in the stock market.”
Sylvia Dow, a retired communications worker, said her insurer, Southern Fidelity Insurance, increased the premium on her Margate home by 36 percent from $2,010 to $2,729 this year.
“It was quite a shocker, but we have to deal with it because we have to have insurance,” she said.
Dow said she was surprised when Allstate dropped her coverage in 2007 because she doesn’t live near the coast and she hasn’t filed a claim in the 20 years that Allstate covered her home and car.
Major national insurers such as Allstate and Nationwide dropped policies after the 2004 and 2005 hurricanes. State Farm, the state’s largest property insurer, faced some unique challenges.
The company announced its plan to leave Florida’s property insurance market early last year after the state rejected its request for an average rate hike of up to 67 percent.
Months later, the state Legislature approved a sweeping measure to deregulate insurance rates, hoping it would help the state keep companies like State Farm in Florida, but the bill was vetoed by Crist.
But Deputy Insurance Commissioner Belinda Miller said State Farm’s low rates were its own doing: Unlike other insurers, the company offered voluntary discounts, not required by the state, for years.
“That was not rate suppression. That was a company doing in Florida exactly what it’s doing in other states,” Miller said. “They put us through hell over the 67 percent rate increase when in fact at least half of that was self-inflicted.”
Eliminating the discounts translated to a statewide average rate hike last year of 28 percent for State Farm, regulators estimated. State Farm struck a deal with regulators to stay in Florida but to drop 125,000 policies and increase rates by another 14 percent, on a statewide average basis.
Miller said Florida’s problem stems from its growth in development in recent decades, which means there’s more potential damage from hurricanes. At the same time, insurancen companies have less appetite to cover catastrophies; they’d rather sell other, more profitable types of insurance, such as autos and other vehicles.
“It’s not that we have more hurricanes. The problem is we’re building more in their path,” Miller said.
In addition, some lawmakers and regulators argue that it’s unclear just how bad insurers’ financial health is; many pay fees to affiliate companies to manage parts of their business. Unlike the insurers, their affiliates aren’t subject to regulatory restrictions on profit and dividends, and they aren’t required under state law to file audited financial statements.
“It seems like there’s a big loophole there,” said Chris Cury. Cury is a real estate developer who recently got his license to become a public insurance adjustor.
State Farm increased the premium on Cury’s home in Plantation from $2,500 to $4,200 – 68 percent. “I didn’t understand it because there hadn’t been hurricanes in several years,” he said. “I’m in the real estate business, so it hit me hard.”
Gail Bierworth, of Lighthouse Point, said State Farm increased her homeowner insurance premium 83 percent, from $3,395 to $6,214, even though her home was completed in 2005 and has hurricane impact windows and other features fortifying it against storms. She said State Farm covers her home and car. She’s purchased her homeowners insurance from the company for 20 years – and never filed a claim.
“I can’t believe that a company can raise the premium 83 percent in one year. This seems to me to be most unconscionable, especially at this time of our uncertain economy,” she said before calling state officials to complain. State officials, she said later, weren’t very helpful.
She ultimately she lowered her coverage dramatically – from $698,600 to $390,000 – to bring the premium near last year’s, $3,420. “That was the lowest they’d be able to lower my coverage,” she said. “It’s probably on the low side…but I’m comfortable with it.”
Posted by Bill Siegel Florida Home Inspection Team Inc
This could just be the beginning in tax increases for Broward County
Even with that rate hike, the county is looking at cutting hours at the Main Library in downtown Fort Lauderdale, closing a jail tower in Pompano Beach, eliminating some bus service and mowing grass in regional parks less often.
Bus fares also would increase, and officials would pull money out of cash reserves set aside to deal with hurricanes and other emergencies.
Broward commissioners left open the possibility of a rate increase Tuesday after County Administrator Bertha Henry laid out her initial plans to tackle a projected $100 million budget shortfall. But they said that the sheriff, property appraiser and elections supervisor should shoulder the same size hit that other agencies take.
“Government grew, and now government has to contract,” Commissioner John Rodstrom said as he zeroed in on the fact that the proposals raise tax rates.
About half of all property owners would see their county taxes increase under Henry’s plans — mainly longtime Broward homeowners. Businesses and those who do not qualify for homestead tax exemptions such as landlords and snowbirds would see a decrease in their bill because of lower property values. So would about a fifth of homesteaded residents — primarily those who purchased homes during the real estate bubble of the last decade.
Henry agreed to send the commission by July 15 several budget options that differ in how severely they affect services. The nine commissioners will consider the proposals when they return from their summer recess, and hold public hearings in September before setting a tax rate.
Broward County, like other governments in Florida, faces another trying budget year because of the recession. Property values plunged 12 percent under the preliminary tax roll released this month, meaning the county will collect less money if tax rates remain the same.
More than 200 sheriff’s deputies and 50 arts advocates packed the Governmental Center for the budget discussion, demanding the county avoid cuts.
“It’s good for them to see the faces of the people being cut,” said Dan Reynolds of the AFL-CIO, who helped organize the turnout of Sheriff’s Office employees.
Henry laid out two tax scenarios for commissioners. The difference was whether they accept the contention of Sheriff Al Lamberti, Elections Supervisor Brenda Snipes and Property Appraiser Lori Parrish that they cannot cut more.
If the three make no further cuts, Henry suggested tax rates for general operations increase from $4.89 to $5.40 per $1,000 in property value. If the three cut the same as agencies under Henry’s command, then she suggests the tax rate increase to $5.23 per $1,000 in property value.
For the longtime resident who owns a home, the county portion of the tax bill would grow from an average of $593 last year to as much as $667. Those who more recently bought homes would see their tax bill drop as much as $131 from an average of $835 last year.
Henry said the public should view her plan as one that largely holds the line on taxes. She noted to commissioners that tax collections would decrease 5.4 percent.
About $32 million would be cuts from agencies that report to the county administrator, including libraries, parks, mass transit and social services. Employees would not receive raises and would have to take five days off without pay next year. Also, 137 jobs would be eliminated.
Libraries and transit each would take a hit under Henry’s plans. Hours would be cut at the Main Library and at the library the county shares in Davie with Nova Southeastern University.
Bus fares would increase from $1.50 to $1.75 in October. The time between buses on some routes would increase, and some weekend service would be eliminated. Under-used late-night routes also would be stopped.
The cuts come on the heels of two previous years of budget-trimming. Library and park hours were reduced and the minimum-security stockade closed last year.
Henry said if she were forced to make more cuts than proposed this year, she would not only look at closing branch libraries, but would have to consider ending some consumer protection programs and returning the licensing of child care centers to the state. Also, she said, health care for the indigent and children of poor families might have to be cut.
Commissioners largely said they remain committed to having Lamberti, Snipes and Parrish share equally in cuts. That would mean Lamberti must find an additional $18.8 million in cuts, and commissioners want to know what progress has been made on ensuring the county is not paying for law enforcement that should be the responsibility of each city.
“People are feeling the pain and lack of service and are beginning to say they may be willing to pay a little extra to keep service,” Commissioner Diana Wasserman-Rubin said in supporting Henry. “People are smarter than what we give them credit for, but we need to tell them where their money is going.”
No more extensions of tax credit for first-time home buyers
Reporting from Washington – Home buyers hoping to take advantage of a new or extended tax credit should not procrastinate: This third bite at the apple will be the last.
Proponents of the $8,000 credit for first-time buyers and the $6,500 credit for move-up buyers made it clear during the debate on Capitol Hill that the benefits would not be renewed when they expire. And a lobbyist for the National Assn. of Realtors confirmed that at the group’s annual convention last month.
Lawmakers “made us promise practically in blood that we would not come back” for another extension, Linda Goold, the Realtor group’s director of tax policy, told her members.
During the debate, Sen. Johnny Isakson (R-Ga.), a former real estate broker and a longtime proponent of the tax credit, promised his colleagues, “This is the last extension.”
And Senate Finance Committee Chairman Max Baucus (D-Mont.) said, “It is important that this tax credit does not become a permanent fixture of the tax code.”
As it stands now, buyers who meet the income eligibility requirements have until midnight April 30, 2010, to ink a deal and must close by midnight June 30 to qualify.
Congress enacted the original $7,500 first-time buyer credit as part of the Housing and Economic Recovery Act of 2008. But because the credit had to be paid back it was more like a no-interest loan than a true credit and there were relatively few takers.
So in the American Recovery and Reinvestment Act of 2009, lawmakers upped the ante to a maximum of $8,000 for new buyers who closed before Dec. 1. They also said the new credit need not be paid back unless the taxpayer moves out within the three-year period following the purchase.
This second attempt at stimulating sales worked so well that the housing lobby implored Congress to help keep the momentum going. So lawmakers extended the deadline for first-timers and added a “long-term resident” tax credit for repeat buyers who owned their current home for at least five consecutive years out of the last eight.
Incidentally, the credit is not a flat $8,000 for new buyers and $6,500 for repeat buyers. It is 10% of the purchase price up to those ceilings. There is no credit if the price of the house is above $800,000.
Another new construction walk through
Once again, I had a new construction walk through today. This was a three story town home that the developer was using as the model. Very nice unit, with the usual problems, until I got to the third floor. Two doors were out of square, both stall shower floors had sunk about one eight of an inch, and the window sills had separated. Someone did not do something right or did not follow the plans, and now they are going to have to do some investigation to figure what went wrong. In today’s economy, this is not an inexpensive piece of property. It appears to be a fixable problem, but at what cost? And will my client go through with the purchase? Do not know these answers.
It just proves once again the importance of getting a home inspection, whether it be on a resale or new construction.
Posted by Bill Siegel Florida Home Inspection Team Inc.
New Construction Walk Through
I get asked the question all the time – do i need a home inspection on a new property. The answer is yes. Most of the time we get called after the home is built do do the walk through. Not only do we look for our normal items, but we also look for cosmetic issues. Just as an example, on a condo I just did we found the following:
- A missing shelf in the kitchen cabinet.
- Two loose toilets.
- A shower head not working properly.
- A faulty arc fault breaker in the panel box.
- The shower handle plate was not caulked to the wall.
- The air conditioner was not functioning.
- Both bathroom mirrors were incorrectly hung.
All of this was found in a decorator ready unit, which means the floors have not been installed and the wall have not been painted.
Posted by Bill Siegel Florida Home Inspection Team Inc.