Insurance: Some homeowners prefer to go 'bare'
|Dick Eichhorn decided against buying property insurance for his Key Royale home because of the uncertainty over what insurers would actually pay if a storm hit. Islander Photo: Molly McCartney
Homeowner Dick Eichhorn is a member of a tough and optimistic group of Anna Maria Island property owners who have decided to take a gamble and go without wind, flood or fire insurance.
They're going bare.
He got the idea for this seven years ago when he bought a house on Key Royale and began to shop for an insurance policy.
"I found I could only get coverage for about one-third the value of the house," he said. "They would cover only $250,000 and there was a $50,000 deductible. And the policy didn't cover the pool, the cage cover for the pool or the grounds."
Eichhorn also had questions about what the policy would pay if his house was damaged in a storm.
"I was led to believe that the insurance companies were very picky about what is flood damage versus what is rain damage," he said.
In other words, he was familiar with how difficult it can be to collect on a policy when a house is damaged by wind, water or other hazard.
While he was looking at the costs and benefits of various insurance options, his real estate agent mentioned that "a lot of people on Key Royale do not have insurance because they can afford the recovery cost," Eichhorn said.
"That started me thinking," he said.
Eichhorn is a retired businessman from Minnesota who specialized in electronic office systems. He took his first risk in 1971 when he left what he described as a "nice corporate job" with Honeywell and helped to found a new company.
After buying his house on Key Royale in 2000, he took the precaution of making the house as storm-proof as he could.
He installed an aluminum roof that can withstand winds of up to 140 mph. He put roll-down storm shutters on all the doors and windows.
"That gives me some comfort that I will probably escape most of the storms that hit here, except for one that wipes out Anna Maria Island," he said.
He figures that he has saved about $45,000 in insurance premiums over the past seven years — enough to offset the cost of the storm shutters and the roof improvements.
Eichhorn said his house elevation is 9 feet above the mean-high-tide level. He knows "if this whole area gets flooded, the Island won't be inhabitable for a long time anyway."
He is philosophical about the future.
"If a big wind storm or a big flood happens here, it happens," he said. "And I will decide what to do at that point. It won't be the end of my life."
Eichhorn said he is comfortable with his gamble because of the uncertainty of what the policy would cover if he was willing to buy one.
For example, he said, he has a neighbor whose asphalt shingle roof was damaged by a storm several years ago. The neighbor's insurance company calculated the age of the roof at the time of the storm and the neighbor "essentially got nothing for his roof," Eichhorn said.
"That supported my argument that insurance is a funny obstacle to overcome," he said.
Eichhorn acknowledged that some homeowners don't have the option of going bare.
"If you have a mortgage, you have to have insurance," he said.
Obtaining personal liability insurance without buying homeowner's insurance can also be a problem for some people, he said. He happens to have personal liability coverage through the homeowner's insurance he carries on his Minnesota home.
Others go bare
Eichhorn said he knows other homeowners who are going without property insurance because they agree with him that it is a risk worth taking.
That is also the opinion of Mary Ann Schmidt, an agent with SunCoast Real Estate.
"I think a lot of people are not insuring their homes," she said. "They are not buying homeowner's insurance because it isn't worthwhile for them. They just buy the liability."
Schmidt is the agent who sold the Eichhorns their home on Key Royale in 2000 and the one who suggested that they consider going without coverage.
"People are paying cash for their homes and they are not getting homeowner's insurance" because of the high premiums and the uncertainty over what policies would pay, she said.
That pattern has become more apparent in recent years as the cost for policies has soared, she said.
She described the impact of insurance premiums on the buyers of a house last year in Anna Maria City. "I remember the bill was over $18,000 for everything, by the time they got the wind, the flood, the homeowners."
As a result, more and more people who can afford to pay cash for their houses and who are willing to run the risk of storm damage are opting to go without property coverage, she said.
Commercial property risks
Some commercial property owners on the Island would also like to drop their coverage.
Diane Tremblay just received her bill for wind insurance on the four-unit apartment building she owns at 200 S. Harbor Drive in Holmes Beach.
Last year her premium for coverage with Citizens Property Insurance Corp, the state's insurer, was $612, she said. Her new premium is $2,722.
And although her insurance costs are going up, the amount of coverage is shrinking, since Citizens increased the deductibles on the policy, she said.
"I'm not planning on renewing the policy," she said, because she figures she would have to have a claim of over $20,000 before she would be eligible for benefits due to the size of the deductible.
Tremblay said she will continue her flood coverage on the property, but she's hoping she can drop the wind policy.
"When you look at how much trouble people have had getting their claims paid," she said, "it may not be worth having the policy."
Note: If you have an insurance story to share about your experience with rate hikes, rate reductions, rate refunds or other insurance issues, please send a note to The Islander by emailing firstname.lastname@example.org.