SARASOTA – Are you paying more than you should for homeowners insurance?
If you have coverage through state-run Citizens Property Insurance Corporation, critics say you might be. And they’re suing to stop it.
As Citizens tries to become more actuarily sound – that is, to take in enough in premiums to be able to pay out claims if a big disaster happens, it is hampered by a Florida law that says that it can raise rates only 10% a year.
The people suing say Citizens has found a way around that — by artificially inflating home values.
“It’s just a back-door tax, in reality,” says David Welch, of the Florida Association for Insurance Reform (FAIR), which supports the suit. He says Citizens now inflates values of homes it insures – in many cases more than double what they’re worth – just to collect higher premiums.
Welch cites the case of a New Port Richey man who paid $100,000 for his house. His insurance agent recommended buying $139,000 in coverage. Citizens demanded that he insure the home for more than $200,000, Welch says.
“They can charge what they want,” he says. “All we’re trying to do is bring it down.”
“Homeowners are looking at their home as far as the value of it, the market value, what can i sell my house for?” says Florence Conlan, a private risk adviser for Baldwin Krystyn Sherman Partners. What you you pay to buy a house can have little relation to what it costs to rebuild it. Companies – including citizens – have to consider more than market value.
“They’re looking at demolition fees, architectural fees, rebuilding a home up to current building code standards again,” Conlan says.
“We agree with that,” Welch says. “And we’ve had to educate a lot of folks about that.”
But he says that, even accounting for that, Citizens overstates replacement cost simply to push premiums up. He says a builder can tell you how much you’d have really to pay to replace your home. And, with that, Conlan agrees.
“Discuss with a builder certain specifics that they have for their home, if they were to rebuild it,” she says.”
Citizens said in December that it would review some of its home valuations – and include opinions of general reconstruction contractors.
And it insists that its assessments are made solely to ensure that it can pay replacement costs for damaged homes – not to jack up the premiums.