As inflation drives up construction costs and property values, Citizens Property Insurance Corp. began canceling some homeowners’ policies across Florida because the estimated price of replacing their home after a storm or fire would now exceed a $700,000 replacement value cap.
Data from Citizens, the state-licensed home insurer of last resort for homeowners who can’t find coverage in Florida’s volatile home insurance market, shows the company has dropped 2,267 policies over the past in the year ending June 30 because the cost of replacing homes exceeded $700,000, the cap set by the state in all but two counties, the The Sun Sentinel newspaper first reported.
In Miami-Dade and Monroe counties, the cap for homeowners to be eligible for a Citizens Insurance policy is set at a much higher $1 million as a tighter insurance market and a dearth of options for consumers makes adequate insurance harder to find there than in the rest of the state.
Florida regulators undertake study of eligibility caps across the state
The trend has prompted the state to initiate a study of the $700,000 cap, instituted so that taxpayers don’t end up subsidizing wealthy homeowners who can afford private insurance to cover homes that are worth more.
Insurance agents, homeowners and lawmakers have complained that the $700,000 threshold is now unfair, penalizing homeowners who aren’t wealthy but whose home values have risen sharply in a booming real estate market in South Florida. No deadline for review by state insurance regulators has been announced.
If the state Insurance Regulatory Board finds that homeowners can’t get affordable coverage from private market insurers, caps could be raised in Broward, Palm Beach and other counties, the report said. Sun Sentinel. The study will analyze Florida’s 67 counties.
Citizens sent non-renewal notices to customers in Broward, Palm Beach counties
The Sun Sentinel said citizens sent notice of non-renewal to 617 insured homeowners in Broward with replacement values exceeding the $700,000 eligibility cap and 454 in Palm Beach County. The story did not say how many Miami-Dade or Monroe owners were affected because estimated replacement values exceeded the $1 million cap.
At the same time, rising property values and rising building material and labor costs mean more Broward and Palm Beach homeowners are at risk of losing their Citizens policy.
In Broward, the number of single-family homes and condos with a market value over $700,000 increased 46% between 2021 and 2022, to 46,815. In Palm Beach, the number jumped 65% during the same period, at 67,112, the Sun Sentinel reported.
Homeowners Abandoned by Citizens Might Have to Pay Much More for Insurance
Citizen-abandoned homeowners who need insurance because their mortgage lenders require it will likely face much higher rates to get coverage. Lenders can appoint an insurer. The only other option might be to seek much more expensive cover in the unregulated excess lines market. These policies may also offer less coverage than state-regulated policies.
Amid a statewide home insurance crisis that has seen private insurance companies fail, cancel or stop underwriting policies, the number of homeowners covered by citizens has skyrocketed, reaching 938,437 on July 1. That compares to 419,000 citizen fonts in 2019. The Sun Sentinel said the number of citizen-held fonts has increased by about 9,000 per week over the past four weeks.