You may be hearing a lot about Citizens Insurance Company lately. You may not know much about them, other than the fact that it was your only reasonably-priced option, or perhaps your only option at all. So I thought would be timely to write a piece explaining the ins and outs of this state run "insurer of last resort," and provide you with a few things to know before signing up with them.

First, a little background...

Following the devastation of Hurricane Andrew in 1992, 11 insurance companies went bankrupt, and most others stopped writing new policies entirely. As a result, almost 1 million people were unable to find homeowners insurance. This led to the formation a state funded insurance pool (formerly called the JUA), which eventually, in 2002, became known as Citizens Insurance Company. Since that time, Citizens has served as our state's insurer of last resort for people who are unable to find reasonably priced insurance, or any insurance at all. 

Fast-forward to today...

Citizens is once again very much in the mix for a majority of Floridians due to our state's insurance crises. Understanding its background, it's important to realize that Citizens is not trying to be competitive in an open marketplace, nor are they trying to grow to become more successful, the way you would expect an insurance company to be. In fact, Citizens would prefer to not grow. The larger Citizens is, the more indicative it is of an unhealthy private insurance marketplace.  

You may be facing a choice between Citizens and a private-market insurance company. Or Citizens may be your only choice. Regardless of your situation, here are three things to know about Citizens Insurance Company before you sign up:

1. The Potential for a 45% Assessment  

Because they are the insurer of last resort, Citizens finds itself covering a majority of higher risk properties, and as a result, being more likely than other insurers to pay out a significant amount of claims - both in frequency and in severity. Because their risk for claims outweighs the premiums they bring in, they have stated in the policy's fine print that if they run out of money, they can assess their policyholders an additional 45% of their premium. So for example, if you have a $2,000 premium, you may be asked to pay an additional $900 per year. This is very important to be aware of up front. 

2. Limited Coverages

Citizens has limited coverages compared most other private insurers. The clearest example of this pertains to personal liability insurance (think in terms of a visitor to your home tripping and falling on your pool patio and getting injured, for example). Citizens offers a maximum of $100,000 in coverage, whereas a private insurer will have options that range up to $500,000 in this category.

3. Mandatory Flood Insurance

Citizens is now phasing in a flood insurance requirement that you'll need to factor into your insurance costs. While we recommend flood insurance, you may not currently be paying for it, and being forced to do so may come as a surprise. If your home is in a moderate (Zone A) or higher risk area (Zone V), and depending on the insured property value of your home, you will have to secure a flood insurance policy starting in 2024 in order to maintain your Citizens policy. This will be an additional cost not initially factored into your home insurance premium. 

Overall...

While there are some downsides to being with Citizens, they allow many people to obtain insurance when they otherwise could not. This is a good thing. But it's important to be aware of the risks that come with being insured by Citizens. Regardless of how you proceed, as always, we strongly recommend reaching out to us to discuss options that make the most sense for your individual needs. Contact us anytime!