Your insurance company dropped your coverage? It could be doing you a favor in Florida

Your homeowners insurance company dropped you. And now you are forced to look into Citizens, the insurer created by the Florida Legislature as a safety net for those turned down by all other companies.

Does that mean you are being forced to settle for inferior coverage?

Independent insurance agents contacted by the Miami Herald say not at all. For many homeowners, agents say, the insurer of last resort could be the best option.

Here’s what to know about how Citizens stacks up against private insurers:

About a Citizens policy

Only option: Given the number of insurance companies leaving the state — cutting down operations here or simply falling into bankruptcy — many homeowners have no other option but to get coverage from Citizens. In four years, the company’s policies more than tripled, going from little more than 400,000 in 2019 to an estimated 1.4 million by the end of September 2023, according to the company’s website.

Shedding and transferring policies: Citizens has been growing so furiously in the past few months that the nonprofit insurer has begun a “depopulation” program, working with small new players to transfer some some policies to them, usually at a higher cost for the homeowners. The change requires homeowners to accept private insurers’ offers of coverage if they’re within 20% of the cost of Citizens premiums. Florida officials want to move Citizens policies into the private market due to the financial risks associated with major hurricanes. The state is grappling with an insurance crisis, with costs nearly triple the national average. Not all targeted policyholders will be transferred from Citizens to private insurers. But a change approved by the state Legislature in December might push customers away from Citizens.

Rates: Citizens’ premiums are usually lower than those offered by private companies. But that does not mean that the coverage is inferior.

Coverage: “They offer a standard policy. If you have a major disaster, fire, lightning, windstorm, you are covered,” said Randy Marzullo, who works for the firm We Insure in Coral Gables. “They don’t cover certain things. Dogs, for example, are never included in their policy.” And Citizens doesn’t cover screen enclosures, he said.

Policy type: The policy offered by Citizens is a called an HO-3, one of the most common types available in the market.

Payouts: One advantage of a Citizens policy over one from a private company is no limits to payouts for water damage. “They don’t restrict you to that $10,000 cap on water damage that most of the companies have on the older homes,” Marzullo said.

KNOW MORE: Citizens is shedding thousands of policyholders. How could that affect your insurance?

Rate comparisons

Premiums: Citizens’ premiums have been going up in recent years, but at a much lower rate than private companies, some of which have doubled in recent years. That’s due to limits to increases, which have been kept at 15% per year or less.

The lower premiums put agents representing private companies at a disadvantage. Marzullo said that whenever he gets a new client, he offers different quotes including Citizens, which normally is the lowest.

“You have to always give them a Citizens quote because you don’t want to lose their business because of that rate cap they have. This is a really big issue. Because of course you’re going to go to Citizens, right? Who wants to pay more for insurance?”

But other agents are concerned about the volume of policies being written by the nonprofit company.

Risk: While agreeing that Citizens is offering a standard coverage at a lower rate and also a lesser chance of its premium going up as fast as the policies offered by private companies, there’s usually an unforeseen risk that clients don’t see before signing, said Fermín Acosta, of F. Acosta Insurance Group in Doral.

“We avoid writing policies with Citizens even though the premium is cheaper due to the large number of clients who are already with the company,” Acosta said. “If there is a catastrophe the client is the one who will be affected. Because it will take longer to process the claims.

“There is the concern that Citizen is not going to have a staff large enough to deal with 10,000 people calling all at once to file claims, that they won’t be able to deal with that ... and that then the client will spend weeks or months waiting because the process will be very slow and face many delays,” he added.