For commercial property investors in multi-family complexes, insurance isn't merely a bureaucratic requirement—it's the bedrock of financial stability, offering protection against potential damages and economic setbacks.
Navigating insurance in Florida requires a structured approach due to local challenges like limited coverage options from weather-related damages and fraudulent litigation. The Citizens Insurance Program, a non-profit insurer, is available to Floridian property owners who can't secure coverage in the private market.
Here's a guide to help borrowers understand and navigate the various facets of this program.
1. Eligibility Criteria Under Florida Law
Before diving into the intricacies, ascertain your eligibility under Florida law. Citizens can issue a new policy only if the property cannot acquire coverage from a Florida-authorized insurance company or is subject to premiums from Florida-authorized insurance companies that exceed 20% of the premiums for comparable coverage from Citizens.
2. Preliminary Preparations: What You Need to Know
To streamline your interaction with Citizens-appointed agents and enhance efficiency, compile as much of the following property-related information as possible:
Basic Features: The property details should include the construction type and year, the number of townhouse units, a list of room types along with their counts, and the total living area.
Fire Protection: You should note the distance from the property to the nearest hydrant and the closest responding fire department.
Major System Updates: Provide specific details about any updates made to key systems in the house, including electrical, HVAC, and plumbing.
Photographs: It's crucial to have photographs for reference. Ensure you capture images of the front and back views of the house, any outbuildings, and areas particularly relevant to your insurance policy, such as the roof.
Roof Information: Important details about the roof should be documented, including its current condition, the materials used, the date of the last update, and its shape.
Specialty Features: If the property has any specialty features, like alarm or fire systems, a home-based business, proximity to water bodies, or amenities like pools or spas, this information should be included.
Wind-Damage Mitigation: Lastly, document any features the property has that mitigate wind damage and provide any available supporting documentation.
3. Understanding Citizens Insurance Offerings
While Citizens serves as an insurance of last resort with a wide range of programs, it's important to note that these programs have limitations in terms of coverage.
Wind-Only and Multi-Peril Programs: These focus on wind or a combination of wind and fire coverages, excluding water damage.
Commercial Policies: These are tailored for business owners, homeowner associations, and condominium building owners.
Flood Insurance: Different coverage limits are available under regular and emergency programs.
Dwelling Coverage: This coverage is for the structure of the home, considering factors like location and deductible.
Special Programs: These include Property Insurance Clearinghouse, Depopulation Program, Florida Market Assistance Plan (FMAP), Managed Repair Program, and Sinkholes Loss Coverage.
Program Limitations: These include the exclusion of business or rental income coverages, and emphasis on roof condition with a requirement of at least three years of life supported by appraisals and reports.
Additional Coverages: These include Catastrophic Ground Cover Collapse, Debris Removal, Credit Card and Fund Transfer Card protection, Forgery and Counterfeit Money coverage, Fire Department Service Charge, protection against Fungi or Rot, and Glass or Safety Glazing Material coverage.
4. Approval Challenges
The process of getting approval for insurance coverage through Citizens in Florida is governed by a number of rules and guidelines. These sometimes come with challenges due to how they are designed.
Roof Condition and Approval: Effective May 1, 2023, for new business and September 1, 2023, for renewing policies, eligibility for coverage based on the roof's remaining useful life (RUL) requires documentation of at least five years for roofs exceeding the maximum age. If different parts of the roof aren't replaced simultaneously, the age is based on the oldest section. Qualifying roofs may receive coverage extensions up to five years, with the possibility of inspections to verify the condition.
Underwriting Review Period: For new policies, there is an underwriting review period, which has been reduced from 90 to 60 days effective July 1, 2023. During this period, Citizens can cancel a policy if it fails to meet the underwriting requirements.
Claims and Unrepaired Damage: Policies cannot be cancelled or non-renewed until damages have been repaired or one year after the final claim payment, whichever comes first, if caused by a covered incident.
Applications for coverage cannot be denied solely due to unrepaired damage that is the subject of a Florida Insurance Guaranty Association (FIGA) claim.
Inspections: Inspections are conducted by a third-party professional inspection company and may be required by underwriters for current policyholders and as a condition for new coverage. Citizens may require property owners to repair hazards or deficiencies identified during these inspections.
Eligibility Rules: Citizens amended its eligibility rules to make a property ineligible for coverage when authorities have determined it to be unsafe for occupancy or if it has substantial structural deficiencies.
Denial Reasons: Poor roof inspection results, an open claim with unrepaired damage, or unfavorable loss/damage are among the reasons a claim might be denied. For instance, a slow leak in a water line might lead to a denial as it could have been discovered upon reasonable inspection.
5. Financial Considerations
Citizens Insurance typically provides rates and deductibles that are competitive when compared to the private market, but its programs are still subject to rate increases.
Rates and Deductibles: As of November 20, 2023, a significant average premium increase of 10.2% is scheduled for all Commercial Lines policies. While deductibles are generally fixed, there may be opportunities to adjust them, particularly for windstorm damage in commercial policies. For instance, Business Income is offered at a rate of $3, but note that this coverage is limited to just two carriers, with coverage capped at $5 million.
Rate Increases: Staying informed about potential rate hikes is crucial. For example, Citizens Property Insurance Corporation's board of governors voted for a 14.2% average increase for personal lines and a 12.3% increase for commercial policies in March 2023. This kind of rate increase could significantly impact the overall insurance cost for commercial property owners.
Quote Validity and Binding: A signed quote from Citizens doesn’t ensure the coverage has been bound, so always follow up. Usually, quotes are valid for 15-30 days, and it's crucial to be proactive as quotes might not always return or terms might change mid-process.
6. Timing Matters
The process of application and approval with Citizens Insurance in Florida requires careful consideration of time, particularly for commercial property owners.
Initiation: Start the application process early; approval can take 60-90 days. Applications can be submitted up to 60 days before the effective coverage date, or 30 days in advance for policies with Coverage A over $10 million.
Quotes: Obtain a quote from Citizens early as private market quotes can expire. The exact validity period of Citizens' quotes may vary, so proactive follow-up is crucial.
Processing: The typical turnaround for new business applications is under 12 business days, with processing time reduced when all required documents are submitted promptly.
Coverage Commencement: If previous coverage expires during the wait, Citizens often retroactively approves your application. Ensure the effective date does not precede the expiry of your current policy.
Payment Deadline: Payment for new-business submissions is due within 10 business days from the policy effective date, an extension from the previous five business days deadline.
7. Inspections
Citizens require inspections to assess the eligibility of a property before any coverage is offered. They can be categorized into two: Citizens-provided inspections and policyholder-responsible inspections.
7.1 Citizens-Provided Inspections
Citizens requires specific inspections based on coverage type, discounts, and property specifics like age and location. These can be exterior-only (roof) or both interior and exterior, assessing areas like electricity, plumbing, and HVAC.
Benefits of these inspections:
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They're free of charge to the policyholder.
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They're conducted by professional third-party inspection companies.
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They aid Citizens in evaluating the property's replacement value, condition, and certain building characteristics.
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They provide insight to policyholders about potential concerns before they escalate.
Citizens may, at times, require the property owner to rectify hazards or deficiencies highlighted by the inspections. Remember, as per Citizens' policy guidelines, they hold the right to undertake inspections at any point.
7.2 Policyholder-Responsible Inspections
Some inspections, while required by Citizens, are the responsibility of the policyholder both in terms of coordination and cost.
Four Point Inspection is required for all property owners, dwelling, and mobile home applications for properties older than 20 years. This process covers the electrical system, plumbing, heating/cooling system (HVAC), and roof. The cost is typically borne by the property owner.
Roofs Inspection is required for homes with single or similar roofs older than 25 years, and tile, slate, clay, concrete, or metal roofs older than 50 years, this inspection aims to verify at least three years of remaining life for shingle roofs, and five years for the other mentioned roof types. Generally, the property owner is responsible for the cost of this inspection, ensuring the longevity and safety of the roofing materials in place.
Wind-Damage Mitigation Inspection helps identify wind-resistant features in homes and assess areas for safety enhancements and potential premium discounts.
New Business Inspections are ordered by Citizens within the first 30 days of policy issuance. These inspections are conducted to evaluate the property's condition and any potential eligibility issues. They are carried out at no cost to the policyholder, by professional inspection firms contracted by Citizens, ensuring a thorough assessment of the property and facilitating a smooth policy issuance process.
Sinkhole Inspection is required for those opting for Sinkhole Loss coverage under specific conditions.
Note: While Catastrophic Ground Cover Collapse coverage might be integrated into certain Citizens policies, coverage for gradual subsidence sinkhole damage remains optional for most policy types.
7.3 Effective Coordination with Inspectors
If your property is earmarked for an inspection, the assigned company will contact either via phone or mail. Inspectors must hold a license in specific categories as defined by Florida Statutes, such as Home Inspector, Building Code Inspector, or Professional Engineer.
Once you've identified an authorized inspector fitting the above criteria, they can undertake your wind mitigation inspection. Upon conclusion of the assessment, the inspector will furnish the OIR-B1-1802 form, encapsulating the findings of the evaluation.
For property owners in Florida, the results of a wind mitigation inspection can lead to significant savings on their insurance policy. It's crucial to understand the details of the inspection report and recognize when an updated evaluation might be required.
7.4 After the Inspection: Next Steps
Once your inspection is completed, your inspector or their affiliated inspection company will furnish you with a detailed report of the findings. Here's what you need to do:
Submit the Report: Ensure you forward this report to your insurance agent.
Review by Citizens: Upon submission, Citizens will meticulously review your inspection outcomes. Should you qualify, any pertinent mitigation discounts will be applied to your insurance policy.
Reinspection - When is it Needed: Though wind mitigation inspection reports typically remain valid for a span of five years from the stated inspection date, there are scenarios that might necessitate an earlier reinspection:
Home Improvements: If you've undertaken any renovations or modifications that could potentially qualify for additional discounts, you'll want to update your inspection. This could encompass structural changes like room additions or roof replacements. Furthermore, if you've implemented new wind-damage mitigation measures aiming for further policy discounts, a new inspection becomes pertinent.
Insurance Claims: In situations where you file insurance claims for specific damage types inflicted on your property, a renewed inspection might be requisite.
Queries Regarding the Inspection: Navigating the landscape of wind mitigation inspections and their implications on your policy can sometimes be perplexing. Here's who to turn to:
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Insurance Queries: For inquiries linked to your insurance policy, coverage, or premiums, your insurance agent remains the best resource. Especially if you're trying to discern how the inspection report influences your policy costs, your agent will provide the clarity you need.
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Inspection-Related Queries: If you have any doubts or concerns regarding the inspection procedure or its execution, don't hesitate to get in touch with the inspector or their affiliated company.
8. Payment Methods with Citizens
8.1 Regular Payment Options
Online Payment Options: Use Citizens' myPolicy or make one-time payments online via U.S. bank accounts, cards, or e-checks. Alternatively, authorize your agent to pay on your behalf using the Single E-Payment Authorization form.
Phone Payments: These are available for most personal and commercial policy types. You can call 866-411-2742 to begin. Remember to have your policy number, property ZIP, routing number, and bank account details on hand.
Note: Agents cannot make phone payments for you.
Mail Payments: When you send a personal or cashier's check, make sure to write your policy number on it. If you're sending a check from outside the U.S., it needs to be in U.S. dollars. Be careful, because if there isn’t enough money in your account, you’ll be charged a $15 fee for insufficient funds.
Mailing Addresses:
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For Regular Payments: Citizens Property Insurance Corporation, P.O. Box 17850, Jacksonville, FL 32245-7850
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For Overnight Payments: Citizens Property Insurance Corporation, Payment Processing Department, 301 W Bay Street, Suite 1300, Jacksonville, FL 32202
8.2 Commercial Insurance Payment Options
Citizens extends flexible payment alternatives for its commercial insurance holders. Choose between quarterly or semi-annual plans, with your eligibility determining your access. Remember, the breakdown of your installments is derived from your full policy premium, excluding one-time fees such as inspection and EMPA. While each installment incurs its own fee, other one-off fees must be settled by the earliest of the policy issuance or effective dates and will be incorporated in the initial payment.
Semiannual Plan Overview:
| Payment | Amount | Additional Fees | Due Date |
| Initial Payment | 60% of total policy premium | Immediate one-time charges | Earlier of policy start date or issuance |
| Subsequent Payment | 40% of total policy premium | 4% installment fee | Six months post policy commencement |
Quarterly Plan Breakdown:
| Payment | Amount | Additional Fees | Due Date |
| First Payment | 40% of total policy premium | Relevant immediate fees | Earlier of policy start date or issuance |
| Second Payment | 20% of total policy premium | 4% installment fee | A quarter-year after policy begins |
| Third Payment | 20% of total policy premium | 4% installment fee | Half a year from policy onset |
| Final Payment | 20% of total policy premium | 4% installment fee | Three-quarters of a year after policy initiation |
A Guideline on Citizens from Advocate
Finding yourself at the mercy of private insurers is daunting but not having any private options is much worse. Fortunately, Citizens has been writing policies specifically for properties in Florida that are not eligible for coverage from the private market.
Navigating Citizens can be complex and requires a structured and multi-faceted approach. With this consolidated guideline, simplify the process for commercial property owners to obtain Citizens coverage.