Q&A of the Day – How Insurance is Taxed in Florida & How Much It Costs You
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
iHeartRadio: Use the Talkback feature – the microphone button on our station’s page in the iHeart app.
Today’s Entry: Submitted via Talkback. The listener asked for information about Florida’s property and auto insurance taxes.
Bottom Line: If anything constructive can come out of Florida’s uber expensive insurance predicament...becoming more informed consumers of insurance would be it. I love this question for that reason. I’ll break down what insurance taxes you’re paying in Florida and how that factors into our highest-in-the-nation costs but first here’s a quick reset on Florida’s auto and property insurance landscape. Florida ranks first in the nation in many economic categories – including having the best overall economy. As we’ve also discussed regularly over the past couple of years, unfortunately we’re also first in an economic category we’d rather not be... Florida has the most expensive auto and property insurance premiums in the country. Insurance policies tend to be something most of us set and forget unless something happens that forces us to reevaluate or do something differently. That’s often not a good a thing. The average Florida household now spends over $5,000 annually on auto and property insurance policies. How often do you make purchases in excess of $5,000 without shopping around a little bit and making sure you’re happy with your decision? Yet most families have been doing that annually with insurance policies.
In recent years, with Florida’s growing property insurance crisis, many have been jettisoned to Citizens. Now, as Florida’s property insurance market is recovering, new insurance options are coming back into the mix. In fact, 300,000 Floridians currently with Citizens Property Insurance, the state’s insurer of last resort, have been sent “depopulation” notices. The notices indicate that their policies are set to be shifted to private property insurers. Provided that policy premiums aren’t greater than 20% higher than Citizen’s rates – homeowners who receive these notices must switch to the private insurer. In the event that policy premium increases are greater than 20% higher – homeowners may stay with Citizens if they provide notice of the intent to do so by October 10th. The policy transfers are scheduled for October 17th. Whether you’re thrust into a situation to reevaluate your auto or property insurance or not, given the rapid rise in costs in recent years it’s worth an annual check in to see what you’re paying, what options may exist for you, and if there are better options available. Doing so could literally save thousands for many Florida families annually. With that said let’s talk taxes...
As the Florida Department of Revenue outlines: There are eight insurance premium taxes and fees. These taxes and fees are paid by every authorized insurance company that issues policies covering risks in Florida.
Tax is due on:
- Insurance Premium Tax – imposed on insurers
- State Fire Marshal Regulatory Assessment – imposed on insurers with a surcharge imposed on policyholders
- Wet Marine and Transportation Tax – imposed on insurers
- Firefighters’ Pension Trust Fund Excise Tax – imposed on insurers
- Municipal Police Officers’ Retirement Trust Fund Excise Tax – imposed on insurers
- Retaliatory Tax – imposed on insurers
- Filing Fees – imposed on insurers
- Commercial / Residential Policy Surcharge – imposed on policyholders
Without diving too far into the weeds, each of the taxes range in cost by 1 to 5% based on insurance product type. As noted, most of those taxes are paid by the insurer to the state for the policies they issue – so the cost of those taxes to the policyholders often isn’t transparent. And then there’s another new tax that is about to be assessed in October...
Due to Florida’s property insurance crisis, the Florida Insurance Guaranty Association, which is the state’s non-profit backstop that steps in to payout insurance claims of defunct insurance companies authorized a 1% emergency assessment which will hit all property insurance policies starting in October. Seven property insurance companies have failed in Florida, most after the effects of Hurricane Ian last year, and the state has paid out hundreds of millions of dollars to those with outstanding claims with delinquent providers. The 1% assessment is for the purpose of recovering those funds. Given the average insurance premiums paid by the typical household in Florida, about $380 of your total annual insurance costs are taxes.