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Citizens Property Insurance plan could send rates soaring for new customers

TALLAHASSEE, Fla. – May 16, 2012 – If Citizens Property Insurance Corp. moves forward with a controversial plan to uncap rates for new customers, the price to join state-run insurance will increase by an average of 30 percent next year.

Data prepared for a Citizens committee meeting on Thursday show the plan would lead to significantly higher premiums in most cases, and homeowners in some parts of the state would pay twice as much as their neighbors for the same coverage.

The plan – which Citizens agreed to study more closely after it sparked public outcry last month – is part of the insurer’s aggressive push to reduce its risk and shrink in size. Central to its strategy is finding ways around a 10-percent cap on rate increases put into place by the Florida Legislature in 2009.

Christine Turner Ashburn, spokeswoman for Citizens, said the proposal is one of several options the insurer is looking at to help reduce the risk of financial calamity after a hurricane.

“In reviewing the law, a question was raised about whether or not the statute (required) a rate cap for new business,” she said.

Citizens’ rationale for uncapping rates is that the 2009 law specifically addresses rate “increases,” so new customers should not be covered.

The plan – which still has to receive board approval before advancing – would have varying impacts for homeowners in different parts of the state, according to data prepared by Citizens’ staff. The cost of a new homeowners’ policy in parts of Miami-Dade County, for example, could increase by more than 95 percent. A Hialeah homeowner who joins Citizens next year might pay a $1,950 premium, while a neighbor with similar coverage pays $1,000.

In Hillsborough County, rates could increase by up to 10 percent. Pasco County wind-only policies could jump by 31.6 percent. Some policies – mostly condo owners – would become cheaper under the proposal.

Citizens sees uncapping rates as a way to raise more revenue to cover expenses if a storm hits, and help make state-run insurance less attractive when compared to the private market. With more than 1.4 million policyholders, the bulk of whom are located in South Florida and the Tampa Bay area, Citizens is the state’s largest property insurance company.

Gov. Rick Scott has asked the board of Citizens to look for ways to reduce its exposure and shore up its finances.

Citizens estimates that uncapping rates would bring in about $100 million in additional revenue each year, with average premium increases of 30.5 percent for new customers. In some counties, new customers have made up as much as 70 percent of all Citizens’ business in recent years.

Additionally, Citizens is pushing plans to automatically drop certain homeowners – in sinkhole-prone counties, for instance – and then re-approve them after an inspection or renovation. When those homeowners rejoin Citizens, they would be doing so at the “new customer” rate, potentially costing them hundreds of dollars in higher premiums.

They would join a growing chorus of frustrated homeowners whose rates are skyrocketing under Citizens’ new risk reduction campaign, often more than the 10-percent rate cap.

Stuart Ledis, a Palm Beach County man who was dropped by a private insurer and forced to buy Citizens coverage, said his premium has increased from $2,800 to $5,400 since February.

“I don’t know how they get away with this,” he said. “We’re not even three months into this and they’ve already raised our rates three times.”

Copyright © 2012 The Miami Herald, Toluse Olorunnipa. Distributed by MCT Information Services.

Reprinted with permission. Florida Realtors®. All rights reserved.

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Six questions to ask when shopping for homeowners insurance

NEW YORK – Feb. 21, 2012 – Homeowners should work with experts to determine the type of homeowners insurance they need and the amount of coverage.

“Besides knowing the basics of what a standard homeowners insurance policy covers, consumers should ask a series of questions – and receive satisfactory answers to each of them – before buying a new policy or renewing an existing one,” says Michael Barry, vice president, media relations, Insurance Information Institute (I.I.I.). I.I.I. is a nonprofit, communications organization supported by the insurance industry.

According to I.I.I., there are six basic questions everyone should ask before buying or renewing a homeowners insurance policy:

1. How much would it cost to rebuild my home in its current location in the event of a total loss? Ideally, a homeowners insurance policy should cover the cost of building a new home from scratch. In general, homeowners policies cover partial or total damages caused by fire, hurricane, hail, lightning or any other disaster if it’s listed in the policy. Flood and earthquake-related losses must be insured separately because both perils are excluded in standard homeowners insurance policies.

2. How much is my personal property worth in the event of a total loss? A homeowners insurance policy should cover the cost of replacing all personal property (furniture, appliances, clothing) should it be stolen or destroyed by fire, hurricane or another insured disaster. Most companies provide personal property coverage equal to about 50 to 70 percent of the amount of insurance on the home’s structure. (A $100,000 policy for the structure would have perhaps $50,000 to $70,000 worth of personal property coverage.)

However, the best way to determine personal property coverage in a specific situation is to conduct a home inventory. I.I.I. provides online software to help homeowners catalog and value possessions (link underlined to: https://www.knowyourstuff.org/iii/login.html) as well as an iPhone app.

3. How much liability protection do I need?
 Liability covers homeowners against lawsuits for bodily injury or property damage caused to other people, including damage caused by pets. The liability portion of a policy pays legal defense costs and any court awards – but only up to the limit set in the policy. It’s effective not just inside the home but also anywhere in the world. Liability limits generally start at about $100,000, and many insurance agents will recommend at least $300,000. Homeowners with significant assets may want more; others may want less.

4. What level of additional living expense coverage do I need? The Additional Living Expenses (ALE) provision is found in standard homeowners insurance policies. It pays for the costs of living away from home if damage from an insured disaster makes the house uninhabitable. ALE covers hotel bills, meals and other expenses above customary living expenses.

ALE coverage differs from company to company. Many policies provide coverage equal to about 20 percent of dwelling protection. For example, if the structure of your home is insured for $100,000, you would have $20,000 of ALE coverage. Some companies impose a time limitation, such as 12 to 24 months.

5. Should I buy a separate flood and/or earthquake insurance policy? Flood coverage is available from the federal government’s National Flood Insurance Program (NFIP) and from a few private insurers. Earthquake coverage is usually available in the form of a supplemental policy.

6. Do I qualify for any discounts?
 Homes with smoke detectors, burglar alarms or dead-bolt locks often get a premium rate discount. Sophisticated sprinkler systems and alarms that ring at monitoring stations often reduce homeowners insurance premiums too. Ask an agent. If you are at least 55 years old and retired, for instance, you may qualify for a discount of up to 10 percent at some companies. If you have completely modernized your plumbing or electrical system recently, a few companies may provide a price break.

© 2012 Florida Realtors®

Reprinted with permission. Florida Realtors®. All rights reserved.

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