Miami Real Estate Learning Center

DO YOU KNOW THE TRUTH BEHIND INSURANCE RATES INCREASE?

We are facing increasing home insurance costs. Every year I am dreadful when I see the phone call from my insurance broker.

The trouble began due to a high number of insurance claims, due to hurricane damage. This has made many big insurance companies leave or reduce their business in Florida. For homeowners in Miami-Dade, Broward, and Palm Beach counties, it means fewer choices and higher insurance rates. The other troubling issue causing higher rates is the abuse of the legal system, where some people file big claims for small problems. In a word, FRAUD.

As an example of abusive claim, some people filled out a claim for an entire kitchen for just a small leak instead of just fixing the leak. In a case like this it would cost the insurance around $80,000 while for the owner to resolve the problem themselves it would have been a few thousand dollars. This sort of abusive claims drives up costs of insurance for everyone, not only the person filling the claim. In 2021 Florida made up only 8% of the entire United States claims but 76% of its lawsuits.

On the other hand, critics say that insurance companies are unfairly blaming the high number of lawsuits for their troubles instead of accepting that they didn't plan well for the risks in Florida. They believe that insurance companies used hurricanes as an excuse to charge more while giving less to their clients. We will never know if this is true, but the rates are higher for sure. At the end, homeowners are the ones who end up paying the price for these insurance challenges.

A HIGH VALUE "STARTER HOME" !

For a long time, owning a home has been a cherished part of the American dream. However, in the last few years it has been a more expensive dream! Some people own a $300,000 first home (like I first did) but the new generation of youth now owns a $3 million to $4 million "starter" home!

For example, Don Henley, a musician, who provided his 20 years old son with an eco-friendly, open-concept home for $4.3 million. Jordan McGraw, a singer, whose parents, reportedly gifted him a $10 million mansion in 2020. Some of these young buyers receive financial support from their renowned families, while others make these purchases independently. Many real estate agents acknowledges that parents purchasing homes for their children is not a new concept, but today, increased global wealth has made it more normalized.

Real estate is seen as a secure way to preserve wealth and generate income through renting or selling properties, especially in an uncertain economic climate. We professionals observe that young generation often buy smaller homes than their parents but with similar architectural styles. For many wealthy parents, teaching their children about smart real estate investing is a way to impart knowledge about wealth management. So, for affluent youth, investing in high value "starter homes" is increasingly becoming a pathway to wealth and financial literacy. Maybe I'll reconsider opening a Tiktok account if I can meet this youth!