Florida homeowners pay some of the highest property insurance rates in the country, but have you ever wondered how the price you pay is calculated? NBC6’s Sasha Jones reports
Florida homeowners pay some of the highest property insurance rates in the country, but have you ever wondered how the price you pay is calculated?
In Florida, the state takes into consideration what’s known as a catastrophe model. It’s mapping that puts historical disaster data into complex mathematical models. The outcome is a risk prediction for your home.
Watch NBC6 free wherever you are
WATCH HERE“What we did was basically we did a survey of the housing stock in Florida, and we basically figured out all the different combination of features houses have,” Dr. Shahid Hamid said.
Hamid is a professor of Finance at Florida International University. He is also a member of the team of experts who created the Florida Public Hurricane Loss Model.
Get local news you need to know to start your day with NBC 6's News Headlines newsletter.
SIGN UP
The model takes into account information like the property location, what materials the home is made out of, and past natural disasters to help calculate risks.
The model also looks at inflation and the price of reinsurance, backup coverage for insurers.
“So, we have to have very accurate address… and then we map it to what information that we have about elevation. And that really becomes critical. And differentiating how floods affect different houses,” Hamid said.
Responds
Responding to every consumer complaint
Risk factor is just one component in how your property insurance is calculated. Hamid says insurance companies take the annual average for claims and divide that by the total value of assets the insurer covers. Next, he says, are added expenses such as underwriting, reserves, profit margin, and reinsurance costs. But you can lower the price you pay through mitigation efforts.
“Just having a strong garage door, good window coverage,” said home and mortgage expert Holden Lewis with NerdWallet.
He says improvements such as impact windows or a new roof help to reduce your risks.
“Really the main thing, the main thing people can do is to have impact windows to make sure that roof is strapped down. If the house is probably less than 20 years old, you probably are pretty set on those things,” Holden said.
Your risk factor can also increase depending on how your home was built.
