A Florida homeowner with a metal roof that was 10 years old, plus one day, would only receive 70% of its replacement value if something should happen, like a hurricane. That could come to pass if Senate Bill 76 makes its way through the Florida Legislature.
Proposed by Sen. Jim Boyd, R-Bradenton, the legislation would allow insurance companies to change the way they cover older roofs. As written, insurance companies could pay the homeowner what the structure was worth at the time of its demise, rather than the full replacement cost.
“You can legislate whatever you like, but how are insurance companies going to do this?” asked Mel Montagne, president of Fair Insurance Rates in Monroe (FIRM) and a local insurance broker. “Right now, rates are based on replacement value, not cash value. If you’re going to switch, are you going to charge a lower rate because you’re offering less coverage? I don’t see anybody talking about that.”
The bill outlines a schedule of depreciation for roofs older than 10 years:
- 70% replacement value for a metal roof type
- 40% replacement value for a concrete tile and clay tile roof type
- 40% replacement value for a wood shake and wood shingle roof type
- 25% replacement value for all other roof types
Right now, if a Keys homeowner were to have a mitigation inspection — where the insurance company assigns credits for solid construction — the metal roof has a warranty of 30 years and a concrete roof is awarded a 50-year warranty.
The 10-year timeframe is ridiculous, said Dion Watson of Keys All Area Roofing.
“Using good quality materials and a good installer — a roof should last much longer than 10 years,” she said.
Montagne said the proposed legislation has unintended consequences. It’s also another strike to affordable and adequate insurance in the state of Florida, which in turn has consequences for the real estate market. (See sidebar).
According to FIRM, 35% of about 28,000 claims for Hurricane Irma to Citizens Insurance Corp. were closed without payment.
“That means that the damage was less than the deductible,” said Montagne. That reinforces FIRM’s stance that the strength of Monroe County’s building code is the best in the state, with far fewer hurricane claims.
The real estate market in Florida is hot right now, with many relocating to the Sunshine State due to the pandemic. Any bill that makes insurance policies weaker or raises premiums threatens the industry.
“We have seen real estate deals fall apart in the Keys, once we add up the quotes for flood, wind and homeowners insurance,” Montagne said.
Senate Bill 76 also reduces the amount of time homeowners have to file claims from three years to two years. The bill would also require policy holders to notify insurers at least 60 days before filing lawsuits.
So far, the bill has made it through the banking and insurance committee and is currently in the judiciary committee’s review before moving to the rules committee.
Keep an eye on OIR
In the coming months, the Office of Insurance Regulation will be setting the 2021-2022 insurance rates for windstorm policies. If the office accepts the recommendations made at the end of January by the Citizens Insurance Corp. board of governors, Monroe County homeowners with existing policies will get to stay under the 10% annual premium hike. But new policy holders would not get the same carve-out.
“New policies written in Florida and in Monroe County could see premiums increase far above that glide path,” said Mel Montagne, president of FIRM (Fair Insurance Rates in Monroe). “With the amount of real estate turnover we’re having these days, everywhere, it means Citizens will be writing a lot of policies at this higher rate. Without a rate cap, many of these people who want to buy Florida real estate are going to be in for some major sticker shock.”
The OIR will make the final determination on the rate that goes into effect on Aug. 1, 2021.