Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 28, 2022

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Like a good neighbor…State Farm may borrow your hedge trimmer and not return it!

But worse yet, the company plans to send 10,000 Florida homeowners in search of new coverage next year, according to National Underwriter. Unfortunately, this happens frequently with smaller companies. Sometimes they stop doing business in a certain state. Other times, they go out of business altogether. While large names like State Farm can weather a larger storm that leads to many claims at once, a smaller company cannot. This doesn’t mean that they’ll choose to take the associated risks.

Yep, the second largest personal property insurer in the Sunshine State will non-renew 10,000 home insurance policies. They’ve decided that the ongoing risk of claims associated with windstorms and other natural disasters outweigh not just the national average, but the potential profits they stand to make. That’s the simple answer.

How did State Farm decide to pull out of Florida?

Contrary to what you may see or hear in their formidable television, radio and internet marketing campaigns, State Farm’s main goal, as a multi-billion dollar insurance company, is actually to avoid paying insurance claims brought on by backing your car up a pole or having your home destroyed by a robot alien (both examples in their recent television commercials). As an insurance company, they are required to pay out certain claims as detailed in their policy document. Insurance companies are, by their very nature, risk averse. No matter how big or small they are, insurance companies are always running the numbers and looking at projections to decide what their next move will be.

By doing so, they increase shareholder returns…you know, for people who own their stock…not necessarily those who purchase their insurance. Dwelling coverage typically comes with specific risks, and insurance companies do their best to include or exclude a wide range of hazards. They also have to account for the cost of hazards that aren’t significant enough to include in their policies (or those they forget).

(Which insurers spend the most on advertising?)

It may sound cruel, but insurance is a business. No business is in “the business” of losing money. State Farm, like many insurers in hurricane-ridden Florida, love to sell insurance policies when they can, then disappear when they are not making as much money. It’s common practice. Of course, there are insurers who specialize in hurricane and other high-risk dwelling coverage in areas like Florida. They generally charge higher premiums to match their risk. This can also apply to auto insurance depending on the history of claims in the area and other factors.

The only difference between State Farm and other, typically smaller insurance companies, is that they will simply buy more advertising time and sell policies in other states. They have enough of an advertising presence to balance out any losses they do take by cancelling or non-renewing all policies in the state of Florida. Chances are they’ve run the numbers and determined they’ll achieve greater financial stability when everything is considered. Homeowners insurance is a great example, but this applies to all insurance products.

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What can you do If your policy Is non-renewed?

Exactly what you should have done before you purchased a State Farm homeowners insurance policy. Get insurance quotes online and/or shop your insurance premium with an independent agent. Your insurance quote may even end up being cheaper than the premium you had with State Farm. Keep in mind, State Farm is required to give you a certain amount of notice before they choose not to renew. Don’t wait to start shopping. You may want to research different property insurance policies which takes time. If you wait until the last minute, you could have a lapse in coverage which comes with problems of its own.

Independent insurance agents represent several insurance companies and can usually find you a lower cost insurance policy than the captive guys, who can only supply a single quote.

So, when you State Farm agent doesn’t return you phone calls after you’ve been non-renewed, you can rest assured your independent agent will have more options for you.

Remember, insurance isn’t about advertising. It’s about coverage and premium.

Don’t be fooled by a television commercial. Independent insurance agents can usually find you MORE COMPREHENSIVE insurance coverage for less money.

After all, they don’t have to pay for all those silly commercials, which will certainly increase your premium.

Read more: Top 10 homeowners insurance companies.