Homeowners Insurance Premiums Rival Some Mortgage Payments

Are insurers in your state requesting approval for another premium rate hike? Likely they are. Newsweek reports that Florida’s largest insurer, Citizens Property Insurance Corp, has requested a 13.5 percent rate hike but says it needs a nearly 93 percent increase to match the competitive market.

Citizen’s Property Insurance is the state-sponsored insurer of last resort- an insurer many Floridians have flocked to in the wake of several insurance companies ceasing business in the Sunshine State.

Homeowners Insurance Premiums: The New Mortgage Payment

Today Florida has the highest home insurance rates in the nation. A recent study by the virtual insurance company Insurify revealed that in 2023, Florida homeowners paid an average annual premium of $10,996, or an average of $916 each month- a payment that rivals retirees’ previous or existing mortgage payments! In 2024 the average annual homeowners insurance premium is projected to be $11,759. Consequently, the Florida retirement dream has become a nightmare. 

A Retirement Dream Turned Nightmare

Florida was once among the top-ranked states attracting new residents during the COVID-19 pandemic. Those moving to the Sunshine State were attracted to the warm climate, lower real estate costs, and remote work flexibility. Retirees moving to Florida benefited from no state income tax maximizing income from pensions or retirement accounts. However, for many skyrocketing homeowners insurance, elevated home prices, and signs of an unstable real estate market have turned the Florida retirement dream into a nightmare. 

What was once the nation’s most attractive state to retire in now ranks eighth among the most desirable states in which to retire. Bankrate’s analysis weighs affordability, overall well-being, the cost and quality of health care, and crime rates for each U.S. state. It found Frlida ranked eighth for the second year behind Delaware, West Virginia, Georgia, South Carolina, Missouri, Mississippi and Pennsylvania.

Options for Retirees Crushed by Insurance Premiums

Florida retirees who can no longer afford homeowners insurance premiums have a handful of choices- few of which are appealing. The first option is to relocate to another state with lower insurance premiums and a moderate cost of living. Several of these states can be found in the American South such as Alabama, West Virginia, Tennessee, and Kentucky. Floridians may also find relief in Wisconsin, Iowa, Nebraska, Ohio, and Indiana. 

Another choice for Florida retirees is to simply stay put and take the financial hit. For most this likely means increasing retirement withdrawals to cover the increasing cost of living which will substantially shorten the lifespan of their retirement savings. They’ll pay now and suffer the consequences later. 

Those who are unwilling to relocate or take larger distributions from their retirement nest egg may turn to the home they can no longer afford to insure. How a retiree chooses to accomplish this will have a direct impact on their monthly cash flow for years to come. 

A HELOC or Home Equity Line of Credit gives homeowners a credit line based on the home’s value and remaining equity. For the next 5-10 years (the “draw period”) the homeowner may access funds from the credit line up to the maximum limit assuming the lender doesn’t freeze or reduce the available credit due to market conditions. During the draw period, the borrower is only obligated to make interest-only payments. However, at the end of the draw period, the remaining loan balance amortizes into full principal and interest payments which could create a payment shock for homeowners on a fixed income. 

Another alternative is a reverse mortgage. Similar to a HELOC the loan provides the homeowner access to a portion of their home’s value, however, unlike a HELOC reverse mortgages do not require mandatory principal and interest payments and the credit line cannot be frozen or reduced because of worsening housing market conditions.

Should homeowners insurance be the new mortgage payment for retirees? Absolutely not. Yet, that’s the reality many face today. Even worse, those without a mortgage may forego insurance altogether risking a complete and catastrophic loss of what is likely their largest asset. 

Reverse mortgage professionals would do well to partner with local property and casual insurance agencies to possibly assist those who can no longer afford homeowners insurance premiums or who have canceled coverage altogether.