A Q&A for Citizens Property policyholders wondering: Should I stay or should I go?

Published Oct. 13, 2012

A November deadline is looming for about 175,000 Citizens Property Insurance policyholders.

Their dilemma: whether to accept an offer from a much smaller, private, Florida-based insurer to take their homeowners policy or stick with state-run Citizens.

Here are some answers to common questions about the issue:

Why is Citizens Property Insurance doing this?

As private insurers have cut back on the number of Florida policies they're willing to write or have exited the state entirely, many of those unwanted policies have flowed into Citizens, the state-run insurer of last resort. As a result, Citizens has ballooned to nearly 1.5 million policies.

The problem is that in the event of a major hurricane, everyone in Florida who pays auto or homeowners insurance could be assessed to help pay claims that Citizens could not cover. Though Citizens has built a hefty reserve of more than $6 billion through seven relatively storm-free years, a major hurricane in a metro area or multiple hits in one season could be difficult to afford.

To reduce its risk, Citizens is trying to raise rates as much as allowed, cut back on coverage and shift as many policies as it can back into the private market.

How many homeowners are getting offers?

The Florida Office of Insurance Regulation has approved five Florida insurers to take out of Citizens up to 210,000 policies all together. However, some "takeout" insurers already have indicated they do not plan to offer policies to the maximum number of property owners for which they are approved. Citizens estimated that about 175,000 letters went out.

What if I want to stay with Citizens?

Mail or fax back the form rejecting the offer before Nov. 6. Your signature has to be on the form; your agent is not allowed to sign the document on your behalf.

What happens if I do nothing?

Your policy will automatically be assumed by the takeout company upon your normal renewal date. This is an "opt-out" situation, meaning it's up to home­owners to tell Citizens if they do not want their policies taken over by the company that contacted them.

Does the opt-out notice include the rate the new company is offering? And does it indicate what the new rate will be if I stay with Citizens?

No. This deals only with a future change of coverage. Renewal terms are typically sent to policyholders a couple of months before a policy is set to expire.

Will my rates go up if I stick with Citizens?

Rate changes for individual policies vary, but the majority are heading up. Florida insurance regulators this month approved raising Citizens rates 10.8 percent statewide. That means, on average, a homeowner covered by Citizens would have to pay an additional $250 at the time the policy renews. Some will pay less; some will pay hundreds more. Sinkhole rates are also increasing, particularly in the Tampa Bay area. Sinkhole rates will rise 25 percent in Pasco and Hernando counties and 50 percent in Hillsborough County; that translates to an average increase of $130 to $375 per policy.

Will my rates go up or the terms change if I take the offer?

Your premium may go up, go down or stay the same.

As the plan was approved by insurance regulators, takeout companies are supposed to offer renewal coverage "comparable" to a homeowner's current coverage with Citizens. Your new premium will differ from what you're currently paying based on the approved rates for your new insurer.

In many cases, shifting to a new insurer will not result in lower rates. Citizens is the only property insurer in Florida that is mandated by law to cap rates at no more than about 10 percent annually. In recent years, regulators have approved much higher double-digit rate increases for many private carriers.

Talk to your agent about any specific coverage changes.

Why should I consider leaving Citizens if rates aren't dramatically different?

If a major storm strikes Florida, Citizens' policyholders are on the hook first to help bail out Citizens if it can't cover all of their claims.

Here's how state law is written: If Citizens suffers a major deficit after a storm, Citizens policyholders could have to pay up to a 45 percent premium surcharge for 12 months.

If that assessment is not enough, the state could then levy assessments on non-Citizens insurance policies statewide, up to 2 percent of their premium or 2 percent of the deficit, whichever is greater. If that's still not enough, a third assessment of 10 percent of premium per account (for a maximum of 30 percent) could be applied to all Florida insurance policies, both with Citizens and with other carriers.

What companies are taking out policies?

The five insurers approved to take out policies this round are Florida Peninsula, American Integrity, Homeowners Choice, Southern Oak, and Southern Fidelity Property & Casualty.

Are the takeout companies financially safe?

All five insurers were deemed to have sufficient reserves and financial controls by the Office of Insurance Regulation; all five have an "A" rating by ratings agency Demotech. However, there are concerns about how the companies would fare handling claims after a large storm. Most of the companies are relatively young and have not faced a major hurricane. Another ratings agency, Weiss Ratings, gives four of the five poor ratings and did not rate the fifth because it is too new.

Consumer advocates suggest that you talk to your agent and do your own homework on the track record of the insurer, how long it has been in business, its claims-paying history and other relevant details.

What if I want a different takeout company to assume my policy?

It's not your choice. Under the takeout program, each insurer decided to whom it wants to offer a policy. At any time, you can contact any insurance company to see whether it is interested in taking your policy when the next renewal rolls around.

Will my coverage shift to the new company in the middle of my policy year?

Yes, but your policy language and rates established with Citizens will still be in effect; the risk simply shifts to the alternate insurer. At renewal, you will get a new offer from the takeout company based on its coverage and rates approved by Florida regulators.

If a reject this offer, can I opt out of Citizens at a later date? Can I try to get insurance from another private company?

Citizens is working on a broader program to reduce its policies, or "depopulate." But there is no guarantee a given policyholder will be included in any future takeouts that are approved. Homeowners can always search for coverage in the open market on their own, through a broker or through online sites such as the Florida Office of Insurance Regulation's Choices program (

I heard Citizens was going to loan $350 million to private insurers from its surplus so that it could get rid of more policies.

That's a separate proposal that is still under review. Its fate is not connected to the takeout program now under way.

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