Citizens drops insurance policies as cost of Florida home replacements pushes past $700,000 cap

As inflation drives up construction costs and property values, Citizens Property Insurance Corp. has started canceling the policies of some homeowners across Florida because the estimated price of replacing their homes after a storm or fire would now exceed a $700,000 replacement value cap.

Data from Citizens, the state-chartered property insurer of last resort for homeowners who can’t find coverage in Florida’s shaky home insurance market, show the company dropped 2,267 policies in the year ending June 30 because the homes’ replacement cost exceeded $700,000, the cap set by the state in all but two state counties, the Sun Sentinel newspaper first reported.

In Miami-Dade and Monroe counties, the cap for property owners to be eligible for a Citizens insurance policy is set at a much higher $1 million because a tighter insurance market and a shortage of options for consumers make adequate insurance harder to find there than in the rest of the state.

Florida regulators studying eligibility caps across state

The trend has prompted the state to undertake 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 worth more.

Insurance agents, homeowners and legislators have complained that the $700,000 cutoff is now unfair, penalizing homeowners who are not wealthy but whose homes have risen sharply in value amid a sizzling South Florida housing market. No deadline for the study by state insurance regulators has been announced.

If the state Office of Insurance Regulation finds that homeowners can’t get affordable coverage from private-market insurers, the caps could be increased in Broward, Palm Beach and other counties, the Sun Sentinel reported. The study will analyze all 67 Florida counties.

Citizens sent customer notices of non-renewal to Broward, Palm Beach counties

The Sun Sentinel said Citizens sent notices of non-renewal to 617 home policyholders in Broward with replacement values exceeding the $700,000 eligibility cap and 454 in Palm Beach County. The story did not say how many homeowners in Miami-Dade or Monroe were affected because estimated replacement values exceeded the $1 million cap.

At the same time, rising property values and increases in the cost of construction materials and labor mean more homeowners in Broward and Palm Beach will be at risk of losing their Citizens policies.

In Broward, the number of single-family homes and condos with market values of more than $700,000 increased 46% between 2021 and 2022, to 46,815. In Palm Beach, the number jumped 65% in the same span, to 67,112, the Sun Sentinel reported.

Homeowners dropped by Citizens may have to pay much more for insurance

Homeowners dropped by Citizens who need insurance because their mortgage lenders require it will likely face far steeper rates to obtain coverage. The lenders can assign an insurer. The only other option could be to seek significantly more costly coverage in the unregulated surplus lines market. Those policies may also offer less coverage that state-regulated policies.

Amid a statewide home-insurance crisis that has seen private insurance companies fail, cancel or stop writing policies, the number of homeowners covered by Citizens has ballooned, reaching 938,437 on July 1. That compares to 419,000 Citizens policies in 2019. The Sun Sentinel said the number of policies held by Citizens has been growing by about 9,000 a week over the past four weeks.