Flood Insurance Could Be Required for Citizens Insurance Customers
Citizens Property Insurance Corporation (Citizens) was created in 2002 from the merger of two other entities to provide both windstorm coverage and general property insurance for homeowners who for various reasons could not obtain insurance elsewhere. It was established by the Florida Legislature as a not-for-profit insurer of last resort.
Homeowners who have Citizens insurance will be required over the next few years to also have flood insurance through the National Flood Insurance Program (NFIP) if they’re covered for hurricane winds. This will impact more than a million Floridians, even if their homes are not in a designated flood zone. This law, passed last year, will likely add hundreds of dollars to the homeowner’s insurance bill. Those who fail to comply will have their insurance coverage cancelled.
Naturally, this will apply to new Citizen’s customers (and there will be plenty of them) as private insurers either go bankrupt or leave the state. While the new law could go a long way in addressing the problem, it will dramatically raise insurance costs. These seriously skyrocketing costs could also serve to push more and more homeowners out of the insurance market, leaving them uncovered for future hurricanes.
During Hurricane Ian, for example, only 18% of homeowners in those coastal counties most impacted by the storm had flood insurance. And by some estimates about half the damage in these counties was the result of flood damage. (As a side note, Florida leads the nation in flood insurance policies with about 1.7 million currently.)
The provision doesn’t affect Citizen’s policyholders who aren’t insured for wind coverage – about 300,000.
As of April 1, of this year, all new Citizen’s policyholders with properties in a flood zone will be required to have obtained flood insurance. And on July 1, current policyholders who live in designated flood zones will also be required to have flood insurance – a switch that will affect about 295,000 policies, according to Citizens. These first two moves, however, will likely have a minor impact since flood insurance is already required for anyone with a mortgage on a property inside a flood zone. Therefore, most of those almost 300,000 policyholders are already required to have flood insurance.
But there is a wrinkle in all of this. A 2020 review of mortgages backed by the federal government in Florida found that only 65% of homeowners required to buy flood insurance had a policy.
But what makes the new provision so groundbreaking is when it starts to apply to homeowners outside of flood zones with coverage over $600,000 on January 1, 2024. In the following years (2025 and 2026) those rules will apply to any policies over $500,000 and $400,000, respectively. And on January 1, 2027, every policy will be required to have flood insurance.
And how much will it cost homeowners? Estimates range between $700 and $1,150 per year.