Article
Are you or your clients concerned about Florida’s rising insurance costs?
April 28, 2023 4 Minute Read
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Florida’s property insurance market was in peril before Hurricane Ian barreled into Southwest Florida on September 28, 2022. The massive storm reignited panic for property owners and investors throughout the State. Since 2020, a dozen insurance companies operating in Florida have already gone out of business or stopped providing insurance coverage on properties in Florida. And an additional 30 companies are on the state regulator’s “Watch List” due to financial instability.
The insurers who remain have drastically raised their rates over the past two years. Florida is currently the costliest state in the U.S. for property insurance, and there is no end in sight for rising premiums. The cost increases are driven in part by recent inflationary trends, rising construction costs, weather and the continued rise of fraudulent claims. While figures vary, most sources anticipate premium rate increases of 20%-25% in 2023 for commercial property insurance.
Insurance costs are directly tied to the estimated “replacement cost” value of a property, which is loosely defined as the estimated cost to construct, at current prices, a substitute for a building or other improvements, using modern materials and current standards and design. The replacement cost value is not the same as “market value”, or what the property would likely sell for in an open market. The insurance companies are indifferent to the eventual sale price of a property. Rather, they want to know how much it would cost to rebuild the structure from the ground up, should there be a catastrophe.
As insurance premiums are directly tied to “replacement cost”, its important to have an accurate estimate of your property’s replacement cost value. Hiring a professional appraisal firm will provide an unbiased opinion of replacement cost value to ensure that you are not over insured and paying excess insurance premiums.
The insurers who remain have drastically raised their rates over the past two years. Florida is currently the costliest state in the U.S. for property insurance, and there is no end in sight for rising premiums. The cost increases are driven in part by recent inflationary trends, rising construction costs, weather and the continued rise of fraudulent claims. While figures vary, most sources anticipate premium rate increases of 20%-25% in 2023 for commercial property insurance.
Insurance costs are directly tied to the estimated “replacement cost” value of a property, which is loosely defined as the estimated cost to construct, at current prices, a substitute for a building or other improvements, using modern materials and current standards and design. The replacement cost value is not the same as “market value”, or what the property would likely sell for in an open market. The insurance companies are indifferent to the eventual sale price of a property. Rather, they want to know how much it would cost to rebuild the structure from the ground up, should there be a catastrophe.
As insurance premiums are directly tied to “replacement cost”, its important to have an accurate estimate of your property’s replacement cost value. Hiring a professional appraisal firm will provide an unbiased opinion of replacement cost value to ensure that you are not over insured and paying excess insurance premiums.
Contacts
Courtland C. Eyrick, CRE, MAI, AI-GRS
VAS - Managing Director
