How Buyers Can Protect Themselves with the Homeowner’s Insurance Addendum in Florida

By Derek M. Jorgensen, Esquire
Associate Attorney
Scott, Harris, Bryan, Barra & Jorgensen, P.A.
Palm Beach County Real Estate Attorneys

Rising Homeowners Insurance Costs in Florida

Everyone that lives in Florida knows that our geographic location makes us very susceptible to hurricanes and storms. When combined with massive volumes of insurance litigation and widespread fraud schemes, Floridians have seen the cost of homeowners insurance increase significantly, while coverages have decreased.

Because of these rising homeowners insurance premiums in Florida, buyers should be cautious when entering into a residential real estate contract.

The FAR/BAR Contract and Insurance Complications

When purchasing a home in Florida using a standard FAR/BAR contract, buyers may assume that if complications arise when attempting to obtain homeowner’s insurance, they will not be forced to close on the property without insurance.

While there are some safeguards in place in the FAR/BAR contract for buyers seeking financing that cannot obtain their loan approval due to insurance complications, in cash deals there are no such contingencies.

This distinction is critical for Florida cash buyers.

How a Homeowner’s Insurance Addendum Protects Florida Buyers

So, what should a cash buyer do to avoid a situation where they cannot obtain insurance prior to closing on their house?

Buyers can request that a Homeowner’s Insurance Addendum be added to the contract.

The Homeowner’s Insurance Addendum allows buyers to:

• Cancel the transaction if they are unable to obtain insurance

• Cancel if insurance rates exceed a certain premium amount

This protection is particularly useful for cash buyers who have no safeguards in the event it is determined the home is uninsurable or the premiums are too high.

Using the Addendum as Negotiation Leverage

The Homeowner’s Insurance Addendum can also be used strategically.

It may provide leverage for buyers to:

• Obtain extensions from sellers to secure insurance

• Negotiate a lower purchase price if premiums are significantly higher than expected

Given the volatility of Florida’s insurance market, this can be a valuable contractual tool.

Protecting Your Deposit in a Florida Real Estate Closing

The Homeowner’s Insurance Addendum can offer protection to buyers by allowing them to avoid situations where their deposit is at risk due to a home being uninsurable.

For buyers entering into a Florida real estate closing — particularly cash transactions — including this addendum can provide important contractual safeguards.

Contact Our Palm Beach County Real Estate Attorneys

Scott, Harris, Bryan, Barra & Jorgensen, P.A. has been serving Florida real estate clients since 1989. We assist buyers, sellers, and investors with residential real estate closings, contract drafting, and transaction protection strategies.

Schedule a personalized consultation by calling (561) 624-3900 or completing our online contact form.