BY MATT REED FLORIDA TODAY 1. Insurance companies won't leave Florida. True, private insurers will pay about $9 billion in Florida hurricane claims. And a leading mobile-home insurer canceled its policies and left last year. But Florida is America's fourth biggest state, with a huge population and tons of money. All those people must buy insurance to drive, own homes or run businesses, and they buy lots of insurers' other products, such as mutual funds and car loans. 2. Shop around. Insurers will compete for your money. "Homeowners insurance ... has traditionally been used as a method for insurers to retain profitable personal auto business and umbrella coverage, which often caused it to be a loss leader," says Moody's Investors Service. In other words, insurers were willing to lose money or break even on homeowners policies because it helped draw other business -- just like supermarkets discount 12-packs of Pepsi to lure customers for other purchases.

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Insurance company CEOs said they don't fear hurricanes this year as much as they dread a "soft" insurance market nationwide. When that happens, insurers compete harder for clients, and they do that by cutting rates. If you can't save on homeowners, you could still lower your overall costs by switching your auto or business insurance.

Here's how it works:

- Property insurers have made almost all of their profits, or surpluses, from investment income -- your premium dollars invested in stocks and bonds while they wait to be paid out in claims.

- When stocks and bonds are strong, insurers can cut rates and compete for market share. They maintain profits by investing the bigger cash flow. Insurers call that a "soft" market. When stocks and bonds dip, insurers tighten up. They raise rates, get stingy with policies and defend their bottom lines. That's a "hard" market.

3. Your policy may be full of costly surprises.

- The securities markets have improved. It's time to go shopping.You've probably learned that homeowners' policies contain a special hurricane deductible, typically 2 percent or 5 percent of your home's value. That's more than many people have in the bank.

But keep digging through that policy. You might find:

- You're not covered for wind-blown water. Rain blown through roof vents, windows and cracks doesn't count as windstorm damage to some insurers who consider it flooding. The same goes for storm surge. The only way to know is to ask your carrier.

- Your insurers will "hold back" depreciation. Whatever you lose, adjusters will knock down its value as depreciation, based on its age and condition. After you make repairs, most insurers will send you money for the difference in value between, say, an old roof and a new roof. But you won't have that cash up front to pay a contractor -- and it can be thousands of dollars.

4. Law forces Citizens' rates to be painfully high.

- Your hurricane deductible trumps deductibles for extra coverage. If you normally have a separate $500 deductible for "building extensions" such as fences or sheds, you still may have to absorb a windstorm deductible -- 2 percent to 5 percent of your home's value -- on those items, too. Now, a few months before the next storm season, it's worth talking to an agent to clarify your coverage.Florida law says Citizens, the state-run insurer of last resort, must constantly raise its rates to stay higher than those for private companies. And that's unfair, says the state's Office of the Insurance Consumer Advocate.

Lawmakers said when they created Citizens in the 1990s, they meant to make its rates painful for consumers. That would stimulate them to get out, find private insurance and prevent big government, they said. They don't want Citizens to compete with private insurers.

5. 2004's storms didn't cripple major insurers.

But "the overwhelming number of Citizens' population did not shop their way into Citizens' coverage," says an advocate's report to the Legislature. "Rather, they had no other option. ... They argue that they should not be forced to pay a rate designed to keep them out, when they were forced in by the market."Catastrophe losses in 2004 -- including a tsunami and Japanese typhoons -- amounted to about 4 percent of premiums collected by big insurers, earnings reports show. Losses from hurricanes Andrew and Iniki in 1992 amounted to barely 3 percent of the industry's premium collections that year.

One key to survival: backup policies, or "reinsurance," which companies buy to help cover their losses in a catastrophe. In 2004, only Allstate went without it, records show.

6. Never accept your adjuster's first offer.

Warren Buffett, chairman of Florida's then-No. 2 insurer, Berkshire Hathaway Inc., described Andrew's effect in a 1992 annual report: "Andrew destroyed a few small insurers. Beyond that, it awakened some larger companies to the fact that their reinsurance protection was far from adequate. (It's only when the tide goes out that you learn who's been swimming naked.)"Insurance companies control their costs by "adjusting" claims amounts down to the lowest figure they can defend. At the same time, repair costs soar after a storm because of scarce supplies and contractors.

Dozens of residents told FLORIDA TODAY their adjusters' first offers fell far short of what they needed for repairs after the 2004 hurricanes.

Those who kept good records of their homes and repair estimates wrote back, showing why their insurers should reconsider.

7. It's illegal for insurers to make up past losses.

Many received higher settlement offers, sometimes multiples of the initial offers.Florida forbids insurance companies from increasing rates in coming years to recoup their losses from past hurricanes. They may raise rates only to prepare for the future.

So far, 31 companies have applied for permission to raise rates. Based on computer models and experience, the insurers argue they don't charge enough now to adequately cover the properties they insure. In the long term, rates will rise along with home values in Florida.

8. A lower deductible is going to cost more.

Why the 150 percent average increase in Florida homeowners insurance rates since Andrew? That was supposed to prepare insurers for the next monster storm season and, to a large degree, it worked.Three out of four Florida homeowners must absorb a deductible equal to 2 percent of their home's value after a windstorm. About one out of every 20 homeowners must absorb a 5 percent deductible. Lawmakers have considered making insurers offer 1 percent deductibles as an option residents could buy through higher premiums, as they do with car insurance.

How much higher?

9. The state mandates fairness, not savings.

That's still unclear. But hypothetically: If every homeowner with a 2 percent deductible switched to a 1 percent deductible, the average annual hurricane losses for insurers would increase by 12 percent, state records show. The companies would look to make up that money somewhere.State lawmakers already did away in December with the scariest potential problem for homeowners: the rule that let insurers charge a separate hurricane deductible for each named storm in a season. Now, it's one per season.

Their latest proposals would help but aren't big money savers for consumers:

- Require insurers to print the dollar-value of hurricane deductibles on the covers of policies. Some companies don't do that, and the big deductibles caught consumers buy surprise.

- Urge the U.S. Congress to allow creation of tax-free savings accounts for policyholders to set aside cash for deductibles.

10. Huge differences separate insurers.

- Grant insurers easier access to the state's catastrophe fund in another multistorm fiasco. That would save insurers money in a catastrophe and encourage them to charge competitive rates.Among them:

- Price: Yearly premiums on middle-class houses in the same town can cost anywhere from $800 to $2,900 per year, homeowners disclosed to FLORIDA TODAY.

- Big vs. small vs. government: Proportionately, consumers lodged the highest number of complaints against small insurance companies whose organizations were overwhelmed by the number of claims. But for many, a small private insurer was better than coping with state-run Citizens Insurance Co.

- Mutual vs. publicly held: Mutual insurance companies such as State Farm and USAA are owned by their policyholders. Records show they charge higher rates -- in some cases almost double -- but offer good security and pay dividends to policyholders. Publicly traded companies such as Allstate and St. Paul Travelers charge lower average rates but face pressure to control costs, increase profits and pay dividends to stockholders.

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