This is what you need to know...
Have you received the dreaded non-renewal notice from your insurance carrier in your mailbox? Your premiums get paid and you have never made a claim yet you are still being non-renewed. Well take small comfort in the fact that it is nothing personal as tens of thousands of Florida homeowners are experiencing the same thing. South Florida is getting particularly hard hit with non-renewals due to the proximity to the ocean and being a generally high risk area.
Why is this happening?
The biggest reason why carriers are pulling out of this area is what is called “exposure management” which means they are insuring too many homes in one concentrated area. Insurance carriers must have enough money in reserve to pay claims in the event of a catastrophe, i.e., hurricanes, etc., so when a carrier has too much business in one high risk area they must reduce their book of business.
We have recently seen this with a very popular South Florida carrier, Fort Lauderdale based Universal Property & Casualty Insurance. Once the go to carrier for older homes and condominiums, they have now closed in Florida for all new business and are non-renewing approximately 2500 of their current policies. This has also been the case with other popular carriers such as Federated National and United Property & Casualty just to name a few. Unfortunately, there is nothing a homeowner can do and you must look elsewhere for coverage.
Is your roof too old?
Your roof has never leaked and is in perfect condition but yet your insurance carrier has non-renewed you because they claim your roof is too old. This is the second most common reason for a non-renewal and probably the most infuriating for homeowners. All carriers have underwriting guidelines which means that your home must meet certain criteria in order for them to insure it. These guidelines are continually changing. Unfortunately, many carriers now consider a tile roof over 20 years old past its lifespan. Shingle roofs and flat roofs are given an average of about 10 years. So while your 25 year old tile roof may be in perfect condition and leak free, you will most likely not qualify for any standard carrier other than Citizens (which we will touch on later). Furthermore, many carriers will choose to non-renew you because you simply no longer meet their underwriting guidelines. While maddening, let me explain their rationale: In the event of a hurricane, an older roof will most likely not hold up as well as a newer one because it is not up to today’s more stringent building codes. This is a much greater risk to insurance companies and it is their right to insure only risks that fall within their underwriting guidelines. Many times insureds think they can fight this but rarely do they succeed. Notwithstanding replacing your roof (which is always an option) there is not much you can do but find alternate coverage.
An exception is Citizens. If you receive a non-renewal because your roof is too old or in disrepair, it is possible to have this rescinded. Citizen’s guidelines state that they will insure a tile roof up to 50 years old, though it must be in satisfactory condition and have five years of remaining life left. You will need to work with your agent to have an inspection done by a licensed inspector and submit proof of this to Citizens.
Is Citizens a good option?
Citizens Property Insurance, known as the carrier of last resort, is a government backed carrier which insures the homeowners other carriers will not take. Citizens was created in August of 2002 to provide property insurance to eligible Florida property owners unable to find coverage elsewhere. For reasons which include proximity to the coast, homes with older roofs, homeowners with claims and much more. With many admitted carriers pulling out of the Tri-County area and the entire state for new business, many homeowners are merely left with Citizens as an option, which makes some homeowners cringe. While there are some disadvantages, such as low liability limits and exclusions of certain overages, Citizens is a state backed program meaning you will not have to worry about them going bust.
A catastrophic event, such as a bad storm, could cause some carriers to go under, resulting in a nightmare for their insureds. There is some peace of mind in knowing Citizens will weather the storm.
Florida Law requires that an insurance carrier provide you 120 days’ notice if they intend to non-renew you. If you have received a non-renewal it is important to first speak with your agent to find out if there is anything that can be done to entice your carrier to reconsider. If this is not an option, than be prepared to get your inspections sooner than later. It will be better in the long run to have time to take care of any deficiencies your inspector may find. Your agent will need satisfactory inspections in order to provide you the most accurate quote as well as finalize your new policy.
One final note. Due to rising insurance premiums and non-renewals, many homeowners are opting to take their mortgage companies forced placed insurance because they are finding it less expensive. While this may be true in some cases, there is a reason for this. Force placed insurance only covers your mortgage. It does not cover your equity in the property, your personal belongings, liability or your expenses should you not be able to live in your home due to a loss. For most of us, our home is our biggest investment and it is imperative that we protect it. Always speak with your agent about your options before making this decision.