With the thinning of the insurance market, many property owners have turned to Citizens, the state’s government-funded insurance program. However, there are some items to consider before switching your home’s coverage to the “insurer of last resort”.
What is Citizens?
In 2002, Florida legislation approved the merger of two entities, the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association to become Citizens Insurance. The program was intended to be the “insurer of last resort” for property owners in high-risk areas who were unable to find coverage through admitted insurers.
Following a record-breaking hurricane season in 2004, many insurers in Florida felt the brunt of the financial strain and pulled out of writing business in the state. This was the first time that Citizens experienced a rapid growth in policy count. In response to the thinning of the insurance market, the then-governor changed the eligibility guidelines for obtaining a policy with Citizens. When the program began the Citizens premium was required to be at least 25% less than a comparable offer from an admitted insurer or the policyholder was not eligible for coverage. However, this was reduced to 15% and has remained the requirement moving forward.
Coverage Limits
Due to the thinning of the Florida insurance market and rates at an all-time high, Citizens has been experiencing rapid growth over the past year. While the premium through the state-wide insurer might be lower than an admitted carrier can offer, there are notable coverage differences you need to consider before switching your policy to Citizens.
Limited Water Damage
Perhaps the most important coverage difference between admitted carriers and Citizens is the water damage coverage offered. Citizens limits the amount of coverage in the event of a water loss to $10,000. This means that if you have a plumbing leak or accidental discharge from an appliance that causes damage to your home and contents, the most you would be able to receive in payment from the insurance is $10,000, no matter the extent of the damage or the actual cost to repair. Most admitted carriers offer full water coverage for homes up to 30 years of age. For older homes, full water is available with proof of plumbing updates.
Limited Mold Coverage
Another important coverage that Citizens limits is mold damage. On a Citizens policy, the most you can recieve in the event of a mold claim is $10,000. Admitted insurers will provide a minimum of $25,000 or $50,000 and will consider an endorsement for increased limits if needed.
Limited Liability Coverage
A standard home insurance policy included coverage for personal liability. This protection provides coverage in the event that someone experiences a bodily injury or property damage claim while on your premises. Citizens Insurance caps this coverage at $100,000, requiring policyholders to purchase a separate excess liability policy if they desire an increased limit. In contrast, admitted carriers include $300,000 to $500,000 in personal liability coverage. The option to add up to $1 million is also available with certain insurers.
Optional Endorsements
There are multiple, optional coverages that many insureds decide to add to their homeowners policy, but these are not available to Citizens policyholders. These options include: water back-up coverage, animal liability, hurricane screened enclosure coverage, and personal injury.
Assessments
Approximately 83% of every dollar from a Citizens Insurance policy premium is used to pay claims. A smaller portion of premium dollars is reserved for hurricane season, to pay claims from a possibly devastating storm event. In a particularly busy hurricane season, these funds can become easily depleted, creating a deficit. By Florida law, Citizens is required to charge policyholders assessment fees until the funds are replenished.
The first assessment fee is a one-time payment of up to 45% of the policyholders premium. However, if this amount is still not enough to cover the deficit, Citizens can then charge policyholders an annual fee of up to 30% of their premium, which will be charged each year until the funds are repaid. For example, if you have a premium of $2,000 you could be charged a one-time assessment of $900 followed by an annual fee of $600.
Contact Us
If you have any questions about Citizens or want to explore options beyond the state-led insurer, contact our office. We offer many options for covering hard-to-insure homes and can ensure you’re getting the most appropriate coverage for your most important investment.
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