Do You Need Florida Renters Insurance Wind Coverage?
Many renters don’t actually need wind coverage on renters insurance in Florida. People who live inland often find that the coverage is available, but it makes no real difference to their lives because the risk is small and they’re not responsible for the building, only for their own personal property.
Renters in coastal areas with Tampa renters insurance, or even Miami renters insurance often believe they need the coverage and are disappointed that it may not be available. Again, it’s important to note that as a tenant, you’re not responsible for the building. If you live in newly constructed Tampa apartments, for instance, they’re built to the latest building code standards and designed to withstand windstorms. If there were damage to the building from a hurricane, for instance, it wouldn’t be your problem as a resident.
But knowing that you’re not responsible for the loss if it happens isn’t always enough to set one’s mind at ease. Especially if you live in an older building, or one that was converted to apartments from a single-family residence, you may well want and need the coverage.
Why Is Florida Renters Insurance Wind Coverage Often Not Available?
You’ll find that this changes, often with surprising frequency. Effective Coverage has built close relationships with underwriters that allow us to be the first to know when a territory opens or closes for wind coverage. But why would insurance companies change their mind about whether they want to write windstorm coverage on coastal Florida renters insurance?
In a word, exposure.
Carriers are required to maintain certain levels of reserve funds for payment of claims, should they arise. The companies also have certain amounts of what’s called reinsurance. Reinsurance is nothing more than insurance bought by an insurance company to hedge against the risk of a significant claims event such as a hurricane. Let’s look at the hypothetical insurance company Florida Underwriters Network, or FUN, as an example.
Assume that FUN is required to maintain one million dollars in reserve for general claims from its policyholders, one million dollars for wind claims from its policyholders, and ten million dollars in reinsurance for Florida hurricane claims. That’s based on the current 1,000 policyholders.
If FUN sells 1,000 more policies, they now need to maintain two million in general claims reserves. No sweat, they think. They transfer a million from other unallocated resources, and all is right with the world. But now there’s a problem – the wind claim reserves and the reinsurance aren’t compliant. Maybe they can transfer a million into that reserve account just as easily. That still leaves the reinsurance problem.
FUN buys its reinsurance from the fictional Serbian Wind Insurance Market, or SWIM. SWIM maintains appropriate reserves for the reinsurance they issue, and those reserves are provided in part by investors. If SWIM can’t find someone willing to invest enough in their reserves to create the necessary surplus, they can’t and won’t write additional reinsurance for FUN. That leave FUN with more than adequate claims reserves in both categories, but without the required reinsurance. Without that reinsurance, if a storm were to do more than two million in damages to their policyholders, FUN would have a potentially serious exposure problem. Reinsurance is designed to kick in when a disaster is so bad that it exceeds projected claims payments. This keeps the reserves at the level they need to be.
Because FUN can’t get reinsurance from SWIM, FUN has two choices. They could stop writing new business for a period of time, but that’s a bad business move because then people stop trying to buy new policies from them altogether. The better alternative is to issue new policies of Florida renters insurance excluding wind. By doing that, they’re still able to insure renters against the serious risks they face, just without windstorm coverage.
That rather lengthy example brings us around to the point: The numbers are not as cut and dried as above. Claims reserves are constantly fluctuating due to, well, claims. The reinsurance market is always in a state of flux. SWIM might find a large institutional investor tomorrow and be able to offer FUN the reinsurance they need, though the entire example is intentionally oversimplified a bit. Changes in policies, statutes, claims reserves, and the reinsurance market, along with a fluctuating number of policyholders all factor into how much exposure a company has with wind coverage. If the company is reaching an amount of exposure (worst case total claims payout from an event) that’s beyond their claims reserve or their reinsurance coverage, they change whether or not they’re writing certain types of new business, including windstorm coverage.
The example above is even further complicated by the fact that there’s currently a takeout program in place to transfer policies from Citizens to the voluntary market. This means that companies are buying the policies (and the risk) from Citizens, in order to get the books of Citizens (the insurer of last resort) in better shape. When acquiring thousands of policies at a time, especially ones that you didn’t underwrite in the first place, exposure becomes even more crucial. The Citizens takeout program is definitely having a significant impact on who is willing to write wind coverage on Florida renters insurance, as well as where they’re willing to write it.
The Good News About Wind Coverage On Florida Renters Insurance
You often can get wind coverage on Florida renters insurance. Carriers obviously want to be able to write the coverage, and they adjust their business practices so that ideally they’re able to offer wind coverage more often than not. This varies by underwriter, but Effective Coverage knows how and where you can get the wind coverage you want, or if it’s available at all. By working with the Florida renters insurance experts, you know you’re getting the most current information and the best available coverage given the current state of the market.
Want to know if you can get windstorm coverage on Florida renters insurance? Call the experts at Effective Coverage and they’ll have the answer!