Florida home insurers can now offer reduced roof coverage

Turns out there’s still such a thing as a “free roof,” much to the dismay of Florida’s insurance industry and homeowners who want insurance prices to stop increasing.

Last month, Florida’s Legislature failed to weaken incentives for roofing contractors who canvass neighborhoods offering to get homeowners “free roofs” paid for in full by their insurance companies. This practice, insurance companies say, results in in higher insurance costs for all homeowners.

Now, Florida’s insurance commissioner David Altmaier says that the Office of Insurance Regulation can help where the Legislature failed — by allowing insurers to offer coverage that won’t pay the full cost of roof replacements.

The difference is that the reduced coverage would be voluntary to homeowners, leading some insurance experts to doubt enough consumers would opt in without substantial premium discounts.

At a meeting last month of the Florida Cabinet, Florida’s insurance commissioner David Altmaier said his office could approve insurers’ requests to offer the two reduced-coverage proposals, but as consumer choices rather than coverage limits.

So what does Altmaier’s announcement mean for Florida policyholders? Here is what’s known so far:

Why do insurers want to reduce my roof replacement benefit?

Insurers contend that roofing companies and attorneys have become so efficient at exploiting Florida laws requiring roof replacements that they’ve been forced to raise premiums to nearly unaffordable levels.

Adjusters working for roofing contractors can find 25% damage on just about any roof, insurers say. Full roof requirements can also be triggered if the type of roof tile that your builders used has been discontinued and is no longer available. Building codes require all materials to match.

Eliminating full roof replacement coverage would reduce incentives for contractors to canvass neighborhoods for roof damage and for attorneys to sue insurers for the full replacement cost, insurers say. They contend Florida is the only state with the 25% replacement threshold and one of the only states that require full-replacement coverage in standard all-perils homeowner policies.

How much could I reduce my insurance premium if I accept one of the two reduced roof coverage options?

That’s up to state insurance regulators to approve, based on their analyses of whether proposed discounts are in line with accepted insurance practices.

Ormond Beach-based Security First Insurance offers a discount equal to 5% of a policyholders’ hurricane coverage premium.

For example, the owner of a 9-year-old $407,000 house would save $161 on their annual premium, or 2.05%, says Melissa Burt DeVriese, the company’s president. Owners of older homes with older roofs would save a larger amount dollar-wise, but that’s because their overall insurance cost would be higher, DeVriesse said.

The Office of Insurance Regulation provided examples of two companies — U.S. Coastal and Safe Harbor — that offer roof deductibles of $5,000 each.

Will optional roof coverage reductions help stabilize Florida’s insurance industry?

That depends on how many people opt for it. And that number will depend on how much money people will be able to save on their premium.

Ron Assise, president of The Horton Group, an Orland Park, Illinois-based insurance agency licensed to do business in Florida, doesn’t believe many consumers will opt for it unless the discount is too big to refuse.

“I’d say the adoption rate will be little to none unless the carriers [offer] substantial discounts,” he said. And discounting premiums by too much “would defeat the purpose” of helping the industry regain financial stability, he said. “They need premiums to stay the same or go up.”

Does a 2% deductible mean I would have to pay 2% toward the cost of my roof replacement?

No. As with hurricane windstorm coverage, the 2% is multiplied by the value of your home’s replacement cost. What that means is if your home’s replacement cost is $400,000, your deductible would be 2% of that amount ($8,000), not 2% of the roof replacement cost. The cost of the replacement doesn’t matter — you’ll still have to pay $8,000 before your insurance would kick in.

Would that be so bad?

Yes and no. No, if you can afford the $8,000 and you were already facing a roof replacement project costing much more than $8,000. Yes, if your roof still had nine or 10 years of life left and you don’t have $8,000 to spend.