Michael Letcher

Important Rules to Follow When Selecting a Home Insurance Company in Florida

The beginning of the end of large companies writing new home insurance business in Florida started with Hurricane Andrew in 1992. The final death blow came after the hurricanes of 2004 and 2005. Most of the home insurance companies available to Floridians, are now small startup companies that are not household names. Here's how to pick a good Florida home insurance company in this brave new world.

The exodus from Florida of many of the best companies that write homeowners insurance nationwide began after Hurricane Andrew in 1992. The hurricanes of 2004 and 2005 caused even more companies to stop writing new home insurance business in Florida or to exit the state all together. These days, the few name brand companies that remain don't write new business for the most part. A "who's who" list of over 500 companies has deteriorated into a limited list of approximately 40 companies that are still active. Most of these companies are brand new start up companies that most people have never heard of.

With all of the chaos in the Florida home insurance market, what is the best way for you to find the best Florida home insurance companies?

For starters, it's never been more important to have coverage with a private company - staying away from the bureaucracy of Citizens Property Insurance Company. While Florida's state run insurance company of last resort, is charging below market rates and competing with the private market, there are plenty of storm clouds on the horizon.

Citizens has stated that it does not charge enough in its rates to cover the risks that it is taking. Consequently, the company must borrow even before hurricanes hit in order to have enough cash available to pay claims. It has enough cash to pay for smaller hurricanes but a major event would send Citizens into the bond markets looking to borrow to pay your claim. After major storms, if you are a Citizen policyholder you will be subject to special assessments that will be higher than those who have coverage in the private market. Finally, Citizens has not exactly been the poster child of fast and fair claim payments following major hurricanes.

Moving to the private market of Florida home insurance companies, you should look for companies that have most or all of the following:

Longevity - companies that have been around longer simply have more experience and better developed systems to write policies and process claims.

Financial Stability - high financial ratings, a large surplus to pay claims, and backup reinsurance from companies that also have high ratings.

Risk Diversification - a core base of policies that include an appropriate mix of newer, inland homes balanced out against older homes that are closer to the Florida coast. The policy base of the company should be distributed geographically around most counties in Florida - not just concentrated in the South Florida coastal counties. Finally it is better to find a company that has expanded its policy base to other states in addition to Florida.

Customer Service - the company must have an outstanding customer service reputation and a record of fast and fair claims processing. That means when you call them someone answers the phone quickly. If you have a billing question, they have the people skills and the systems to make things right. After a hurricane, it means that an adjuster will be scheduled quickly to come visit your home and assess the damages. And when he leaves, the company quickly values your damages and sends you a check.

Here's what you can do to figure out if the Florida home insurance company you are considering can meet your expectations in these areas:

Check the websites maintained by the Florida Office of Insurance Regulation and find out when the company first started doing business in Florida. Try to find a company that started doing business before the 2004 hurricanes.

Get the company's NAIC (National Association of Insurance Commissioners) code and use it to check its financial ratings with AM Best and Demotech. Ask how much surplus the company has available to pay its claims. Don't bother trying to assess the quality of the company's reinsurance - the Best and Demotech ratings take that into consideration.

Ask your Florida home insurance agent to explain to you how diversified the company's policy base is across Florida and in other states as well. Find out what you can about the type of risks the company is writing. In general, Florida home insurance companies that have assumed policies from Citizens have a higher risk profile that must be balanced off against newer homes that are further from the Florida coast. Finally, ask your agent about the company's complaint history for the past couple of years. Eliminate any company with a large number of complaints relative to their share of the insurance premium written.

If you follow even half of these recommendations you'll be doing a lot more than the average Florida insurance consumer to find the best home insurance company to meet your needs.

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