After breaking news this week about the Citizens Property Insurance Corp. 10.8 percent rate-increase, Citizens’ policyholders are bracing for drastically higher premiums set to hit in early 2013. Premiums may increase as much as 30-40 percent. However if the rate-hikes don’t accomplish their intended goal- ALL Florida homeowners could end up paying for a major loss- and the real estate market may take a hit as well.
Why the major increase?
Citizens is the state-run insurer in Florida once known as the “last resort” for those who couldn’t obtain coverage in the private market. In recent years, however, Citizens has become one of the largest insurers of Florida properties in the state.
The rate-increase, according to Citizens, is a result of not having enough funds in its reserves to cover claims in the event of a catastrophic loss in Florida. The new rates are closer to what the group considers actuarially sound- meaning, they would allow Citizens to collect enough premium dollars to cover projected losses in the event of a major hurricane.
But what if things don’t go according to plan?
If a major hurricane hits Florida before Citizens’ reserves are capable of covering losses, all Florida homeowners could be charged an assessment on their homeowners policy to cover the losses incurred by Citizens policyholders.
Florida Realtors also began feeling the heat as many fear that home sales will take a hit due to the sticker shock of high insurance premiums. The effect will likely be a leveling off of the recent increase in average home values in South Florida as less buyers will come to market.
For now, the rate increase was approved and Citizens is scrambling to cover their reserve and avoid assessments. With many families struggling to pay current insurance costs- the thought of higher rates is nothing less than daunting.
Those that are forced to insure their homes with Citizens may start taking a closer look at the credits offered by the group that can reduce Florida home insurance premiums. These wind mitigation credits are typically awarded to policyholders whose homes are less resistant to damage due to having:
- Specific types of wind-resistant roof covering including shingles, tar and metal
- A layer of water resistant roofing material to prevent extensive water damage
- Opening protections such as hurricane shutters
- A specific roof shape that is less resistant to damage including hip, gable or flat
Florida homeowners who have the option to obtain insurance in the private market will likely be shopping their policies avidly over the next few months- as they should be. It’s a good time for consumers to hone their insurance-shopping skills by asking about discounts, avoiding claims and taking other steps to achieve lower rates. One such private Florida home insurance carrier, Ark Royal, offers home insurance coverage in many parts of the state and is backed by ASI (American Strategic Insurance).