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Monroe County Property Insurance
Users Guide
This document was designed by Fair Insurance Rates in Monroe (FIRM) to be a general aid to consumers in making choices about property insurance in Monroe County, Florida. It is not meant to be a substitute for formal legal or regulatory advice provided by attorneys or insurance agents, or to advise on any individual choice or claim.
FIRM is a non-partisan grassroots organization formed in 2006 and composed of Monroe County residents united to fight against unfair windstorm and flood insurance rates.
WHAT ARE THE TYPES OF POLICIES AND WHAT DO THEY COVER? (INCLUDING LIMITS IF APPLICABLE)
Homeowners - The policy known as HO3 insures the described owner- occupied dwelling, private structures in connection with the dwelling, personal property on and away from the premises, and loss of use. Personal liability coverage and medical payments coverage are also provided by this policy. Losses to the dwelling and other structures are paid on a replacement cost basis, with no deduction for depreciation if certain conditions apply. Losses to personal property are paid on an actual cash value basis, unless amended by endorsement. Flood insurance is not included in an HO3 policy, and windstorm insurance may or may not be included.
Condominium – The policy known as HO6 is like a regular home- owner’s policy, but for a condominium unit. HO6 insurance policies cover the interior of the unit and personal property inside from the expressly stated named perils in the policy. Your property is covered for full replacement value or actual cash value depending on how your policy is written. Flood insurance is not included in an HO6 policy, and windstorm insurance may or may not be included.
Dwelling Fire - The term “dwelling fire” refers to a basic fire policy designed to insure a dwelling, which is another word for a shelter or structure, and often utilized by landlords, who may not have any interest in insuring the contents of a particular dwelling. Contents coverage is available for an additional cost. As a consumer you will likely be required to purchase a replacement cost policy if you have a mortgage, as this ensures the bank that their asset will be rebuilt in the event of a total loss.
Renters – The policy known as HO4 is an insurance policy that covers tenants from loss of personal property and covers liability insurance for the house or apartment. It does not cover the actual house or apartment that is being rented; that property is covered by the landlord’s insurance policy. It is a comparatively inexpensive policy that provides beneficial coverage and security.
Windstorm – Also sometimes referred to as hurricane insurance, windstorm insurance is a special type of property insurance that protects policyholders from property damage caused by windstorms. It is quite common in certain parts of Florida to be required to have a separate windstorm
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insurance policy, as many homeowner policies specifically exclude wind damage coverage. The deductible on wind policies will usually be computed as a percentage of the dwelling value not a percentage of the loss.
Flood Insurance - Because typical homeowners’ insurance policies do not cover flooding, the occupant must purchase a separate policy for protection against flood damage. For properties in high-risk areas, lenders require mortgaged homeowners to carry flood insurance to protect the structure. It is up to the homeowner whether to purchase additional coverage for the property's contents, such as furniture and clothing. While flood insurance can be purchased through many different insurance companies, all policies are federally regulated by the National Flood Insurance Program (NFIP), so the same policy costs the same amount no matter which company it is purchased through. Under the current NFIP, the maximum amount avail- able for residential building coverage is $250,000 and $100,000 for personal property.
WHEN IS PROPERTY INSURANCE REQUIRED?
Mortgage lenders require homeowners to carry homeowners’ insurance. There are a number of reasons for this, but the most important one is that your lender will want your home rebuilt or repaired in case of any loss. Your home is the collateral for your mortgage and without the home, the mortgage has little value. By requiring homeowners to carry insurance for at least the cost of rebuilding the home, the lender and homeowner are both protected from disaster. Your mortgage may exceed the value of the home, since the lot that your home sits on has a value and is part of the mortgage as well.
WHAT AMOUNT OF COVERAGE SHOULD I PURCHASE?
The insurance company and lender, if the property is mortgaged, will usually require that the property be insured at replacement cost. Replacement cost is the amount of money it would take to replace or rebuild your home with materials similar to the kind and quality used in constructing your home. If replacement cost is used to determine claims on your home, there is no deduction for depreciation, a decrease in value over time due to age or wear and tear. Construction costs, changes in building codes, and new energy and safety requirements can make replacing all or part of your home cost more than the home’s market value. The state of Florida requires that your house be valued at its replacement cost in determining adequate coverage. Where replacement cost is used in determining coverage, the policy limit is usually set for at least 80% of your home's replacement cost. If you fail to insure your home for at least 80% of the replacement cost, your insurer will assess a penalty on partial loss claims. The penalty is called the coinsurance provision of the policy. The coinsurance provision penalizes the insured’s loss recovery if the limit of insurance purchased by the insured is not equal to or greater than a specified percentage (commonly 80%) of the value of the insured property. Additionally, the mortgage lender will buy more insurance to cover the shortfall.
WHAT HAPPENS IF INSURANCE IS REQUIRED AND I DON’T PURCHASE IT?
Lender-placed (or force-placed) insurance is coverage that a mortgage lender or bank purchases for property to protect its interests when the homeowner fails to purchase this coverage. This often occurs during abandonment and foreclosure but can also occur if the homeowner simply misses his payment schedule or is underinsured. The premium cost for this insurance is usually higher than a conventional homeowners’ premium, and this cost is passed on to the homeowner, frequently added to the loan balance. The premium is based on the loan balance and only covers the loan amount. It does not cover any damage to the property. The high premium
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costs and the fact that homeowners are often “forced” to pay for this coverage by the lender has increased the attention for this type of insurance. Fannie Mae and Freddie Mac guarantee a large portion of the mortgage market and are in the process of revising their rules to require admitted carriers and not surplus lines carriers to insure this business. The Florida Insurance Guaranty Association does not cover excess/surplus line carriers where the Association backs admitted carriers.
WHERE DO I PURCHASE WINDSTORM INSURANCE?
Windstorm insurance can be purchased through your local independent insurance agent who represents multiple companies or through a captive insurance agent who is affiliated with one company such as State Farm Insurance. Either type of insurance agent will be able to inform you of your insurance choices. There are also insurance companies that deal directly with the public such as GEICO, Progressive, Amica Mutual to name just a few, and they may be able to provide you with the proper insurance cover- age. USAA is a direct writing insurance company available to members of the military and their families. Because there are very few private insurance companies writing windstorm policies for Monroe County, the vast majority of policies in Monroe County are written by Citizens Property Insurance Corp. (Citizens). Citizens was created in 2002 from the merger of two other entities to provide both windstorm coverage and general property insurance for home-owners who could not obtain insurance elsewhere. It was established by the Florida Legislature as a not-for-profit insurer of last resort. FIRM has consistently maintained that Citizens’ rates are excessive and is challenging the latest proposed rate increase.
WHERE DO I PURCHASE FLOOD INSURANCE?
The National Flood Insurance Program (NFIP) is administered by the Federal Emergency Management Agency (FEMA), which works closely with more than 80 private insurance companies to offer flood insurance to homeowners, renters, and business owners. In order to qualify for flood insurance, the home or business must be in a community that has joined the NFIP and agreed to enforce sound floodplain management standards. Flood insurance can be purchased through the same outlets listed above for windstorm insurance.
WHAT IS A “TAKE-OUT” LETTER AND OFFER AND WHAT DO I NEED TO KNOW ABOUT THEM?
Citizens Insurance has created a “depopulation” program that works with private market insurance companies interested in offering coverage to Citizens’ policy holders. State approved take-out companies can offer to assume your Citizens policy at any time during your policy period. This offer means you no longer are limited to receiving coverage from a government- created insurance company. It is important to note that while no action is needed to accept your take-out offer you must take action to decline the take-out offer. To decline the offer (opt-out) use the form included in your take-out offer. This must be done within 30 days of receipt of the take-out offer. If you do not return the opt-out form within 30 days, your policy will be transferred to the take-out company in a process called assumption. You will receive a Notice of Assumption and Non-Renewal and a Certificate of Assumption from Citizens. Once your policy has been transferred, you have an additional 30 days to return to Citizens. Your agent can assist you with this process. After take-out the only way you will be able to reinsure with Citizens is if your new company increases your rates by 15% or more than an equivalent policy with Citizens.
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HOW ARE RATES DETERMINED FOR WIND?
Your home’s value is one of the driving forces behind your home insurance premium and the amount of coverage you receive. But the value of your home and its contents aren’t the only – or the most significant – factors that dictates how much you’ll pay every year. Home insurance premiums vary greatly by region and company. Every home insurance company uses its own specific criteria to determine rates. So what's the driving force behind rates? A risky policy could place financial strain on a home insurance company if multiple claims are filed and paid out. To determine risk, home insurance companies give significant consideration to past home insurance claims submitted by the homeowner, claims related to that property and the homeowner’s credit score.
The main driver for determining windstorm insurance rates are proprietary hurricane models utilized by both private companies and Citizens. These models use computer-assisted calculations to estimate the losses that could be sustained due to a hurricane. While insurers are there to pay claims, they're also in business to make money. Insuring a home that has had multiple claims in the past 3 to 7 years, even if filed by a previous owner, can bump your home insurance premium into a higher pricing tier or even make your home ineligible for coverage. Factors that impact Monroe County windstorm rates include replacement cost, accessibility to resources and labor costs. Pricing and eligibility for windstorm insurance can also vary depending on an insurer’s appetite for certain building construction, roof type, and condition or age of the home.
HOW ARE RATES DETERMINED FOR FLOOD?
The National Flood Insurance Program (NFIP) sets flood premiums based on flood zones, which are depicted on Flood Insurance Rate Maps (FIRMs). The 100-year floodplain is referred to as the Special Flood Hazard Area (SFHA). In an SFHA, flood insurance is mandatory for homeowners who obtain mortgage loans from a federally backed or regulated lender. Prices vary by zone and also by structural characteristics of the house—most notably the first-floor height relative to the estimated height of waters in a 100-year flood, known as the base flood elevation (BFE). All homeowners in an SFHA should obtain an Elevation Certificate from a licensed surveyor, which indicates the elevation of the first floor in relation to the BFE of the zone, where the property is located.
If your elevation is above the BFE, your insurance premium can be greatly reduced. In essence, the NFIP groups similar risks according to flood zones and aspects of the structure, and assigns to each group the same rate, which can be read from a rating table. This is not unlike the practices of many private insurance companies.
HOW DOES ALL OF THE ABOVE APPLY TO CONDOMINIUM OWNERSHIP? TO COMMERCIAL BUILDING OWNERSHIP?
The same principles will apply for a condo unit owner’s policy HO6. Commercial buildings will follow the same principles as well, with replacement cost determined by an appraisal.
HOW DO I FILE A CLAIM FOR A WIND LOSS?
The first step in the claims process is to contact your insurance agent, if that is not feasible then you should contact your carrier directly. It is important to have these phone numbers in your important papers as more than likely there will be a loss of power, and you won’t be able find the contact information on line.
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HOW DO I FILE A CLAIM FOR A FLOOD LOSS?
Your first step should be to contact your insurance agent. If that is not possible, then as mentioned above, contact your carrier directly.
WHAT ARE THE TIME LIMITS ON FILING A CLAIM?
Most insurance policies do not put a specific time limit on how long you may take after an incident before you file your claim. Most policies state that claims should be filed “promptly” or “as soon as possible,” but that is usually not further clarified. Each company has different requirements and that is why it is important to know these before a catastrophe strikes. FEMA requires a document called Proof of Loss for flood claims. This specific form must be fully completed, signed and in the hands of the insurance company within 60 days after the loss occurs along with sup- porting documents or your claim could be denied!
WHAT ROLE DOES MY BANK AND/OR MY CONTRACTOR PLAY IN THE CLAIMS PROCESS?
Many homeowners are surprised when their settlement check also has their mortgage company’s name on it. Your bank will demand that forms be filled out before funds are released, often in stages as work is completed. There may be inspections of the work, and—of course—extra bank fees. If you have a mortgage, be prepared for lots of extra steps to get your payment. After you file your claim, contact your mortgage company to find out how to get the settlement check endorsed and deposited to your or the lender’s escrow account. The contractor will usually not play any role in the claim process unless you sign an assignment of benefits (AOB).
WHAT ARE “ASSIGNMENT OF BENEFITS”?
Assignment of benefits (AOB) is a legal tool that allows a third party to be paid for services performed for an insured homeowner who would normally be reimbursed by the insurance company directly after making a claim. AOB is commonly used when a homeowner contacts a contractor or water remediation company for assistance following a non-storm related water loss, such as a leaky pipe or an overflow from a plumbing fixture or appliance.
Most AOB agreements presented to the homeowner allow the contractor to stand in the shoes of the homeowner for insurance collection purposes. Some argue that this legal arrangement allows unscrupulous contractors to overinflate or submit improper claims, causing legal battles between the contractor and the insurance company, with the consumer left out of the picture.
WHAT ARE MY APPEAL RIGHTS IF I AM UNSATISFIED WITH THE HANDLING OR AMOUNT OFFERED TO SETTLE MY CLAIM?
You can appeal the claim directly to the insurance company. If that does not prove satisfactory, then you can contact the Florida Division of Consumer Services (DCS) at 877-693-5236 or by email at [email protected]. Insurance companies, by statute, have 20 days to respond to the DCS once a complaint has been filed.
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A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE DIVISION OF CONSUMER SERVIES BY CALLING TOLL-FREE (800-435-7352) WITHIN THE STATE. REGISTRATION DOES NOT IMPLY ENDORSEMENT, APPROVAL, OR RECOMMENDATION BY THE STATE.
WHERE CAN I GO FOR INFORMATION AND HELP?
For assistance in Monroe County, start with your insurance agent or FIRM.
? Fair Insurance Rates in Monroe (FIRM) - 305-294-3476; [email protected]; www.firmkeys.org
Other sources of information concerning insurance topics can be found as follows:
? Florida Office of Insurance Regulation (OIR) – 850-413-3140 (main line); Dept. of Consumer Services – 877-693-5236; [email protected]; www.floir.com
? Federal Emergency Management Agency (FEMA) – 202-646-2500 (general operator); www.fema.gov
? Citizens Property Insurance Company – 888-685-1555 (help line); 866-411-2742 (to report a claim); www.citizensfla.com
? National Association of Insurance Commissioners (NAIC) – Public Education Program - Insure U www.insureuonline.org
? Insurance Information Institute www.iii.org
? National Flood Insurance Program (NFIP) www.floodsmart.gov
(Information for this guide has been obtained from the agencies listed above. More in-depth information can be found at their websites. If you have questions or comments about this document please contact FIRM. We welcome your feedback.)
Please support FIRM in our mission to fight against unfair windstorm and flood insurance rates for the residents of Monroe County. FIRMKeys is a 501(c)(3) registration #CH35195
422 Fleming Street, Ste. 5 | Key West, FL 33040
| 305-294-3476 | [email protected] | www.FIRMKeys.org
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