Insurance Considerations When Buying Property in Florida or California

Property owners in Florida and California have been hit with the realities of skyrocketing homeowner’s insurance rates and insurers exiting the market, primarily due to an increase in climate-related risks. In a Redfin survey, over 70% of homeowners in Florida and 51% in California said they’ve been affected by rising premiums or coverage changes, or they live in an area where these challenges exist.  

If you’re thinking about buying a home in Florida or California, finding a property with the amenities you want in a location you love is just the start. It’s equally important to consider the home’s insurability and potential premiums. Looking at the insurance considerations early can help you avoid an unpleasant surprise later. 

Florida: It’s All About Wind and Flood 

In Florida, wind and flood risk play a major role in your ability to secure coverage and the associated premium. A standard homeowner’s policy automatically excludes flood for any home in any location. And while Florida is known for hurricanes and tropical storms, any storm that drops more rain than the ground can absorb can cause serious flood damage. That’s why many lenders require Florida homeowners to purchase a separate flood policy. 

Wind and hail coverage is also a must due to the high risk of a named storm, and most lenders require it for any home in the state. The minimum required deductible is a percentage of the total dwelling limit, often as high as 5% or 10% of the dwelling limit, totaling tens of thousands of dollars. Though wind coverage requirements are stricter for homes close to the coast, even inland homes can face stringent conditions and high premiums. 

When evaluating Florida homes, steps like the following can help you spot insurance red flags or secure coverage once you decide to move forward.  

• Find out if the current owner has a flood policy and whether it’s transferable, as this is often a more cost-effective approach than buying a new policy. 
• Determine if the current owner has an elevation certificate, which some insurers require as a condition of providing coverage. 
• Conduct an inspection that includes an assessment of the roof’s condition, material, and method of attachment, all of which impact your wind risk. 
• Ask for documentation on the age of the roof, HVAC, plumbing, and electrical systems. Insurers often require this documentation to determine whether they’ll insure the home and the rate. Some won’t provide Florida homeowner’s insurance if the roof is more than 20 years old, for example, and many are using drones to identify older roofs.
• Check whether the home has hurricane shutters, impact-resistant window glass, a hip roof, and proper roof flashing. Risk prevention measures like these reduce your risk and could reduce your premium.  
• Keep in mind that standard flood policies typically provide only $250,000 of coverage for the structure and $100,000 for the contents. If you’re buying a luxury home worth millions, consider adding an excess flood policy for more coverage.  
• Find out if the home was built before 2002. If so, it could be more challenging to obtain insurance since the home might not meet the newest Florida building codes.  
• If you’re buying a condo in Florida to use as a rental, factor in all the related costs that will impact your profit. On top of the mortgage and property taxes, you should also budget for HOA fees (which can run quite high) and all the necessary insurance policies. For high-value homes along the Florida coast, total insurance costs can run in the high four-figures or even low five-figures.  
• Consider taking a higher deductible on Florida homeowner’s insurance to bring the premium down. But be sure you have enough cash reserves to cover the deductible if you have a claim.
  

California: Prepare for Wildfire Risks

Wildfires are on the rise in the US, with millions of acres burned in 2023 and a particularly devastating wildfire causing extensive damage in Maui last year. In response, insurers have become very diligent in assessing California homes for wildfire risk. Most homes in the state carry a wildfire rating, so no matter where you’re looking it’s likely an insurer will scrutinize the property and set the homeowner’s premium accordingly. 

For example, any type of vegetation nearby increases your wildfire risk—and “nearby” includes your neighbors’ properties. You could be drawn to a community with lush landscaping, only to discover you’ll have trouble getting homeowner’s coverage. Even when you can find coverage, you’ll likely face a separate (and often steep) deductible for wildfire incidents. 

If you’re looking at homes in California, steps like these will help you understand potential insurance challenges early in the purchase process.

• Determine the materials used in the home’s construction, as some are more flammable than others. 
• Find out if the owner previously treated the home or roof with a fire retardant. 
• Pay attention to the amount and type of vegetation on the property you intend to purchase and on neighboring properties. Some plants are more flammable than others, and an insurer will factor that in when offering coverage. (And just as they do with roofs, many insurers use drones to assess your property’s vegetation risk.) 
• If you plan to take a mortgage, ask the lender if they have a maximum allowable deductible on California homeowner’s insurance. While the insurer might allow you to take a high deductible to reduce the premium, the lender might not permit deductibles beyond a certain threshold. 
• Don’t forget earthquake risk! It’s almost always excluded from a homeowner’s policy in California, and if the insurer isn’t willing to add the coverage as an endorsement, you’ll need to purchase a separate policy. Location always affects the premium, and if the home is based on a fault line you might have trouble securing coverage. 
• If you have trouble finding a carrier to underwrite the home and you end up buying insurance through the California Fair Plan, be aware the available coverage is limited to four exposures: fire, smoke, lightning, and internal explosion. These bare-bones policies don’t even cover typical homeowner’s exposures like water damage, theft, vandalism, or liability; they also offer limits that are well below what a luxury home will need. A difference in conditions (DIC) policy can help plug such gaps.  

No matter where you buy a home, always budget for any measures needed to make the home more insurable or the premium more palatable, such as: replacing an older roof, adding an automatic water shut-off device to avoid flooding in an unoccupied home, installing a low-temperature sensor for a secondary home in a cold winter climate, adding a security system with a central burglar and fire alarm, or clearing away flammable landscaping. Many insurers offer a discount for these features; others require them as a condition of writing the policy. 

It’s also critical to speak with your insurance broker early—ideally before you put in an offer. Given the challenges of obtaining insurance, especially in certain states, you might want to include a contingency for securing coverage, allowing yourself up to 30 days to find a policy.

Turn to B. F. Saul Insurance for Guidance 

The personal insurance specialists at B. F. Saul Insurance have extensive experience helping homeowners in Florida and California protect their investment, especially for high-net-worth clients purchasing homes worth millions. We’re skilled at navigating difficult markets, advising homeowners during the purchase process, and finding solutions to challenging insurance situations.  

Contact B. F. Saul Insurance to learn how we can help protect your home investment with the right coverage in Florida, California, or any other state.