Risky Homeowners Insurance on Upswing

The sale of fire dwelling homeowners insurance is becoming more popular in Florida, despite higher risks of insurance not covering many losses, according to a South Florida Sun Sentinel analysis of quarterly insurance data. The risky homeowners insurance upswing is part of a growing trend.

Pitfalls include homes not being covered for water damage and several other events known to cause catastrophic damage. Insurance agents are offering the coverage as a way to save customers money and in many cases making it possible for homeowners to keep their mortgage companies from foreclosing on their homes for not having insurance on the property.

The increase is outpacing growth of the more traditional “all-perils” policies that most homeowners choose, the data shows.

Also known as “landlord insurance,” dwelling fire policies are usually sold to owners of rental properties who only seek protection of the home’s structure from fire. The policies do not include coverage for contents, water damage, loss of use, hurricane damage, or liability like dog bites or when visitors injure themselves, which is why these policies are considered risky homeowners insurance.

Fire policies make up a small percentage of homeowner policies sold in Florida. While 4,111,091 owners of single-family homes were insured by all-perils policies sold by state-regulated insurers at the end of last 2024, just 771,571 were insured by dwelling fire policies, data shows.

But since June 2022, the number of dwelling fire policies increased by 81,684 while all-perils policies increased by 47,768. The surge in fire policies has resulted from higher insurance rates, sometimes quadrupling since Hurricane Ian.

A fire policy will satisfy mortgage lenders requirements, despite risky homeowners insurance coverage if it covers the outstanding loan balance or the replacement cost of the home, whichever is greater, according to Mark Friedlander, senior director of media relations for the industry-funded Insurance Information Institute.

Some of the increase is likely a result of an increase in rental units. Another reason is that more homeowners either cannot obtain all-perils coverage or are looking for lower prices. Security First is among Florida-based insurers that offer dwelling/fire as an alternative to all-perils homeowner coverage.

“We’ve definitely seen more homeowners opting for (dwelling/fire) policies lately,” said Brian Murphy, owner of The Murphy Agency, a Brightway Insurance franchise in Palm Beach Gardens, “particularly for investment properties or when trying to reduce premium costs.”

Dwelling/fire policies cost considerably less — $2,649 on average, compared to $3,644 for a traditional all-perils policy, the data shows.

Dwelling/fire policies differ depending on the insurer, and a few companies are promoting custom-blended dwelling/fire policies to homeowners seeking affordable coverage.

They include Boca Raton-based Florida Peninsula, which began selling them in mid-2023 and reported 14,184 by the end of 2024. The company’s website stresses that while designed to provide coverage for rental homes, vacation homes and investment properties, “dwelling/fire policies are also available to those individuals living in a home which features an older roof or are looking for basic coverage at an affordable price.”

Stacey Giulianti, chief legal officer at Florida Peninsula, says insurance agents asked the company to add dwelling/fire to give them more flexibility. Sometimes because of the way companies are required to spread their risks across various parts of the state, they are prohibited from offering traditional coverage in some areas but can offer dwelling fire coverage to lessen risky homeowners insurance risk.

Tampa-based American Integrity Insurance offers homeowners a dwelling/fire product it calls ValueGuard Property Insurance that it says “addresses the fundamental insurance needs of Florida residents, (with) coverage for essential risks such as fire and windstorm.”

The company reported increasing its dwelling/fire policy count by 24,682 between September and December of last year. Features touted on American Integrity’s website include more affordable premiums, core peril coverage, and flexible coverage options.

Manatee Insurance Exchange added 32,413 dwelling/fire policies during the final quarter of 2024, but a company spokesman said the number reflects policies absorbed from an affiliate company, Safepoint, and Manatee’s participation in depopulation of state-run Citizens Property Insurance Corp. rather than any new signups or transfers of policy types.

The 81,684 increase in the number of dwelling/fire policies happened despite a decision disclosed last year by Progressive Insurance to stop selling or renewing coverage. Progressive’s Florida subsidiary ASI Preferred dropped 56,303 dwelling/fire policies during the analysis period.

Homeowners Insurance on Upswing

Coverage options provide homeowners with the ability to turn dwelling/fire policies into insurance that’s similar to all-perils coverage. They warn their clients to choose wisely and ensure they’re covered for whatever claims may come their way.

All-perils policies package various coverages that homeowners want, and they can reduce costs by taking some of those coverages away.

Options to Consider

When considering their options, homeowners must first decide between three types of dwelling/fire coverage:

• • DP-1: This is the most basic of dwelling/fire policies that provide only actual cash value — or depreciated value — coverage for damage from a few “named perils” such as fire, lightning or internal explosions.

• • DP-2: Provides replacement cost or actual cash value coverage and adds additional perils, such as wind, hail, vandalism and damage from burglary.

• • DP-3: Often called “open peril” coverage, these policies cover damage to the dwelling and other structures like garages and sheds, plus damage from theft and wind.

Add-on coverage is often available for screened aluminum structures, personal property theft, accidental water discharge, dog liability, computer equipment and other protections that are standard parts of many all perils policies.

In addition to saving money, homeowners often choose dwelling/fire coverage when they cannot otherwise qualify for traditional policies. This might occur because their home or their roof is too old, their home might not meet an insurer’s minimum value requirement, or they previously have hurt their “insurance score” — which is similar to a credit score — by filing an excessive number of insurance claims.

(Parts of this article were provided by the South Florida Sun Sentinel)