Homeowners in Florida are increasingly opting for a less comprehensive insurance option to save on premiums. This strategy, known as “dwelling/fire” insurance, is gaining popularity, but experts caution that it can come with risks. More and more residents are turning to this option as premiums for traditional policies rise.
According to recent data from the state’s Office of Insurance Regulation, sales of dwelling/fire policies are growing faster than those of all-perils policies. Dwelling/fire insurance is typically purchased by owners of rental properties or second homes. It provides basic coverage for the home’s structure, protecting against fire, hurricanes, or other natural disasters. However, it does not cover personal property, water damage, or liability in cases like accidents on the property.
The trend is becoming more common as homeowners seek affordable options. Florida Peninsula, a Boca Raton-based insurer, started offering dwelling/fire policies in mid-2023. By the end of 2024, the company reported more than 14,000 policies sold. The company markets these policies as a solution for homeowners with older roofs or those seeking basic coverage at a lower cost.
While dwelling/fire insurance may seem like a cost-effective choice, experts warn that it doesn’t offer the same level of protection as traditional all-perils policies. For instance, many homeowners who opt for this cheaper option end up adding coverage separately to cover things like personal property or water damage. This approach can often lead to higher costs in the long run.
American Integrity Insurance, based in Tampa, has also seen an increase in the sales of dwelling/fire policies. The company’s ValueGuard Property Insurance covers essential risks like fire and windstorm, but it doesn’t provide comprehensive coverage. Between September and December of last year, the insurer added over 24,000 dwelling/fire policies. Experts suggest that many homeowners may not fully understand the limitations of these policies.
One of the main reasons homeowners opt for dwelling/fire coverage is that they are unable to qualify for traditional all-perils policies. This often happens when their home is too old, or they have a poor insurance history. Still, experts say that while these policies satisfy mortgage requirements, they may not offer enough protection in case of a major claim.
Mark Friedlander, senior director at the Insurance Information Institute, explains that a dwelling/fire policy is often sufficient to meet a lender’s requirements, as long as it covers the mortgage balance or the home’s replacement cost. However, homeowners should be cautious about assuming they are fully covered.
Insurance agents stress the importance of understanding the risks before choosing dwelling/fire policies. While they may seem like an affordable option, they may lead to higher out-of-pocket costs in the event of a claim. Brian Hodgers, president of Complete Choice Insurance, explains that homeowners choosing this coverage based solely on its lower cost may find themselves in a tough spot later. “Those who chase cheaper options may end up with less coverage when they need it most,” Hodgers said.
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