Florida-owned Citizens Property Insurance can increase its rates no more than 10 percent per year, but the company has two options that allow it to raise rates without impacting that cap: nixing discounts some homeowners receive for hurricane mitigation efforts and increasing a home’s replacement cost in the premium calculation.
Florida homeowners get a property insurance discount if their home has added features that help lower potential damage from a storm. To receive the discounts, homes must first be inspected, and a number of policyholders have done so. However, Citizens claims that the original inspections have listed hurricane mitigation upgrades that don’t exist, and many homeowners don’t deserve the discount.
As a result, Citizens is reinspecting homes, and, according to the Palm Beach Post, only about one in three homeowners keeps a hurricane mitigation discount after the reinspection. About 78,000 Florida homeowners have been reinspected so far, and the ones that lose a discount end up paying about 24 percent more – an additional average of $717 per year. Up to 200,000 total homes are slated for reinspection before the end of 2012.
Replacement costs
Even though home values have decreased, many owners have watched their replacement cost – the amount it would take to rebuild a destroyed home following a disaster – increase. And as the replacement cost increases, the cost of property insurance increases. For some policyholders, their home’s replacement cost is double its value in today’s market.
For all that extra cash, you might think Homeowner at least has a better policy. But starting Jan. 1, Citizens no longer will cover a host of add-ons such as screened porches, pool enclosures and carports. Citizens is the largest homeowners insurance carrier in Florida. For many Homeowners it’s the only option. Citizens’ cutbacks on coverage come on the heels of another move that hit some customers in the pocketbook: A new cost-estimator computer system to replace real estate appraisals in determining a property’s value.
Citizens says it used a private vendor, 360Value, to calculate replacement costs. However, Citizens says it will reevaluate the calculations for South Florida and Tampa homeowners this month.
“In light of publicly expressed concerns about some of the replacement cost valuations generated by 360Value, Citizens will supplement its normal contract monitoring to include a targeted review to validate the accuracy of 360Value outputs,” Citizens said in a release.
Super High replacement-value increase appears to be a back-door way for Citizens to raise rates without state approval. Advocates worry that if Citizens is successful in collecting money on larger insurance policies, other insurance companies will start using similar models.
We live in the Sunshine State of Florida where we enjoy outside living. Eventually the cost may cause Floridians to move to other States
Source: Palm Beach Post, Dec. 22, 2011, Charles Elmore
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