FAQs
Beacon Group answers all of your frequently asked questions about insurance. Call (561) 994-9994
This article contains copyrighted information of the Florida Asscoiation of Insurance Agents and is used with permission. Please contact The Beacon Group at (561) 994-9994 if you have any questions about this article. FAIA is not staffed to take consumer calls.
The "rush to Citizens" for coverage by consumers is taking place at a blistering pace. Often, the premium for a Citizens policy is the lowest of any other carrier quoted. Then, there are those consumers who have been down the road with a carrier that failed, only to be rewritten with another carrier that failed, leading to the thought of "Citizens can't fail, so put me there."
In making a decision to use Citizens (either voluntarily or involuntarily), both the customer and the agent need to understand the differences between a Citizens policy and a standard Insurance Service Office (ISO) policy. This article summarizes some of the more significant differences, yet is not a complete "line by line" analysis of the policies in question.
Note: Our comparison uses the standard ISO HO-3 policy with an edition date of 04/91, the policy used by Citizens. Many carriers have filed modified ISO coverage forms, others filed "me too" type policies matching Citizens, and still others have their own unique forms; so, you must be diligent in your comparisons with each client who requests to move to Citizens. Remember, too, some carriers use the ISO "HO-2000" program forms now; ISO has even rolled out a 2011 revision to the homeowners program that is likely not being used yet by many carriers. Additionally, the coverage provided by some standard companies provides even more "bells and whistles" than the basic ISO policy. Comparing a Citizens policy to one from companies who provide "upscale" coverage would reveal even more dramatic differences.
Additional exclusions and coverage reductions are planned with Citizens. Those future changes are also addressed here.
Current Gaps
Assessments
No discussion about a Citizens policy is complete without a reminder (and warning) of the huge potential assessment faced by Citizens' policyholders in the event that Citizens does not have adequate funds to pay for losses, as much as 45 percent of the premium of the policy. Agents and policyholders should carefully review the assessment potential as outlined by the Citizens' article available by clicking here. As one agent said, "I tell my customer that the cheapest choice today may be the most expensive choice after the loss."
Coverage D: Loss of Use
Citizens:
Coverage D is ten percent of Coverage A and is limited to 24 months.
ISO:
Coverage D is twenty percent of Coverage A and does not have a limit of 24 months.
Coverages B & C and Catastrophic Ground Cover Collapse
Citizens:
"Catastrophic" coverage applies only to the "principle building." Damage to other structures is not covered. Personal property in an other structure is not covered for this peril either.
ISO:
No such limitation.
Coverage C: Food in Refrigerators and Freezers
Citizens:
Limited to $500. No coverage for food in refrigerators and freezers off premises.
ISO:
No such limitations.
Coverage C: Theft Peril
Citizens: Theft on premises is covered. Theft coverage applies off premises only if the property was stolen from a public warehouse, bank, or safe depository company.
ISO:
No such limitation.
Coverage A: Constant or Repeated Seepage or Leakage
Citizens:
Excluded is damage caused by constant or repeated seepage or leakage of water or steam, or the presence or condensation of humidity, moisture or vapor; which occurs over a period of time, whether hidden or not and results in damage such as wet or dry rot, "fungi," deterioration, rust, decay or other corrosion.
ISO:
No such exclusion. This exclusion was removed from the ISO policy in 1991. Losses such as a slow leak from a water line or HVAC unit are typical claims under this peril.
Fungus
Citizens:
Limitation of $10,000 for damage caused by fungus, wet or dry rot, yeast, or bacteria.
ISO:
No such limitation, although many carriers impose a limit.
Section I: Vacancy Limitations
Citizens:
If the dwelling has been vacant for more than 30 consecutive days prior to a loss, there is no coverage for damage caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. Payment for damage caused by any other peril is reduced by 15 percent.
ISO:
The limitation applies only to damage caused by vandalism. The more restrictive Citizens language closely tracks the wording found in ISO's commercial property program.
Animal Liability
Citizens:
There is no coverage under Coverage E, Personal Liability for bodily injury caused by an animal owned by or in the care of the insured, whether on or off premises.
Coverage F, Medical Payments to Others provides coverage for such claims only if the occurrence takes place off of an "insured location."
ISO:
No such exclusion, although many carriers have similar exclusions.
Liability and Medical Payments Limits
Citizens:
Maximum Coverage E limit available is $300,000. Maximum Coverage F limit available is $2,000. (See discussion below about further reductions to $100,000 maximum below.)
ISO:
Limits of $500,000 and $5,000 are available. Some carriers offer even higher limits.
Section II: Lead Paint
Citizens:
There is no coverage for bodily injury or property damage resulting from the ingestion or inhalation of paint that has lead or lead compounds in it.
ISO:
No such exclusion.
Section II: Radon
Citizens:
There is no coverage for bodily injury or property damage resulting from radon or any substance that emits radon.
ISO:
No such exclusion.
Endorsements and Coverages Not Available (Current Gaps)
While not all inclusive, the list below details some of the common coverages and endorsements not available under a Citizens policy.
Personal property limited to 50 percent of Coverage A with no option to increase above that limit.
"Special" property coverage (HO-15 or HO-5) not available.
Water/sewer back coverage not available.
Increased loss assessment above $3,000 not available.
Scheduled property (floaters) coverage not available.
Increased special limits of personal property (jewelry, furs, etc.) not available.
Watercraft liability endorsement not available.
Inability to schedule other structures off premises.
Liability coverage cannot be extended to other locations (rental property or vacation home)
Business pursuits liability not available.
Personal injury liability not available.
Changes Effective 1/1/12
New and Renewal Policies
Coverage A: Property Not Covered
Citizens:
The following property is not covered and there is no buy-back option:
Any structure enclosed by screens on more than one side, constructed to be open to the weather, and not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
Carports, open sided porches that have a roof covering, and patios that have a roof covering, not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
Any structure or attachment where that structure's roof coverings or exterior wall coverings are of thatch, lattice, slats, or similar material.
Slat houses, chickees, tiki huts, gazebos, cabanas, canopies, pergolas, or similar structures, constructed to be open to the weather.
Awnings, aluminum carports, and aluminum framed screened enclosures.
ISO:
No such exclusions.
Coverage B: Property Not Covered
Citizens:
The following property is not covered and there is no buy-back option:
Any structure enclosed by screens on more than one side, constructed to be open to the weather, and not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
Carports, open sided porches that have a roof covering, and patios that have a roof covering, not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
Any structure or attachment where that structure's roof coverings or exterior wall coverings are of thatch, lattice, slats, or similar material.
Slat houses, chickees, tiki huts, gazebos, cabanas, canopies, pergolas, or similar structures, constructed to be open to the weather.
Awnings, aluminum carports, and aluminum framed screened enclosures.
ISO:
No such exclusions.
Cosmetic or Aesthetic Damage to Floors
Citizens:
The total limit of liability for Coverages A, B, and D combined is $10,000 per policy period for cosmetic or aesthetic damages to floors.
ISO:
No such limitation.
Future Coverage Reductions
The Office of Insurance Regulation has approved a rather lengthy list of coverage reductions under all Citizens' policies, including personal lines and commercial lines. Those reductions will be phased in starting in March 2012 and will not all appear all at once. Those pertaining to the homeowners policy are below.
Effective 5/1/12 for new business and 6/1/12 for renewal policies:
Reduce default Coverage B from ten percent to two percent. (Option to buy back up to ten percent.)
Eliminate option to schedule individual Coverage B items.
Eliminate option to buy back coverage for other structures rented to others.
Eliminate option to buy back coverage for other structures used for business purposes.
Reduce default Coverage C from 50 percent of Coverage A to 25 percent. (Option to buy back to 50 percent.)
Eliminate increased loss assessment coverage. Provide only $1,000 in the HO-3 and HO-4, and the statutorily mandated $2,000 in the HO-6.
Implement mandatory ten percent sinkhole deductible.
Reduce personal liability coverage from $300,000 to $100,000. (Medical Payments to Others Coverage remains at 2,000).
Expand sinkhole inspection program to an additional 12 counties.
Eliminate increased mold limit options of $25,000 and $50,000.
Date to be determined:
Eliminate liability coverage for incidental exposures related to motor vehicle, watercraft, animal, home business, and premises liability. The result will be a total exclusion of coverage for all such claims. Newly excluded examples in this category would be the use of a non-owned golf cart, use of a non-owned ATV, use of a non-owned outboard watercraft, use of an owned outboard boat under 25 horsepower, use of a sailboat under 26 feet, the occasional rental of the dwelling, and the rental of the dwelling in part, such as renting out a bedroom to a college student.
Implement a sublimit for items such as jewelry, furs, silver, and firearms for all perils. Currently the limitations apply only to the peril of theft.
Eliminate coverage for dropped objects.
Revise contract to reduce coverage for water losses.
Expand vacancy penalty.
Implement loss history surcharge program.
Restrict ordinance & law coverage to apply only to Coverage A.
This is a summary only. Please refer to the policy for specific coverage interpretations.
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Most personal auto policies provide coverage for driving in Canada. However, we recommend that you check with us before taking your car across the border.
Mexican law requires that you purchase separate liability coverage from a Mexican insurance company prior to operating your vehicle in Mexico. Your personal auto policy may provide some limited coverage but this coverage must meet the insurance requirements of the Republic of Mexico. Failure to purchase the proper Mexican liability insurance could result in a substantial fine if you are involved in an accident while driving in Mexico. Again, we suggest that you check with our office prior to taking your vehicle across the border.
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American drivers are pointing fingers again. A recent survey bears some grim news: the other guy or gal behind the wheel is ruder, more aggressive, and is causing more accidents. A recent survey sponsored by several motorist and insurance organizations discovered that:
Most drivers have recently operated their car, truck, or SUV in a risky manner
Many drivers think that other classes of drivers should have their driving skills regularly tested
The majority of drivers think that their driving habits are fine—everyone else is the problem
It is time to stop pointing fingers. Let's put our hands back on our steering wheels. Regardless who is at fault, the number and severity of accidents and road tragedies are increasing. The only thing that is under your control is your own driving behavior. While you can't predict what another driver is going to do, you can make a stronger effort to make the roads and streets safer.
Obey traffic lights, signs, and road markings. All of these are important methods to control traffic and minimize accidents. Just try to figure out how much time you “save” by tailgating, lane changing, and running traffic lights. If you save anything, it's seconds, not minutes. Also, if you are involved in an accident, you've just lost any time ever gained by risky driving. Insurance paperwork and accident reports can claim hours and days of your life. If time is important to you, then take the time to pay attention to the rules of the road.
You will also find it healthier and safer to avoid paranoia. The other drivers in the other cars and trucks are not out to get you. Don't take things personally since the silly things that happen in cars are usually mistaken or mindless, not malicious. Just relax and concentrate on your own driving. Yield right of way to others, stop for school buses, and watch for pedestrians and bicyclists. The more patient, respectful, and attentive drivers there are on the road, the better it will for all of us (and our insurance rates).
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My Driver Safety Agreement
Driving is a privilege that I may lose by violating this agreement or may have suspended for other reasons, such as (but not limited to) unsatisfactory school grades or violations of family trust.
I will obey any curfews or restrictions imposed by my driver's license.
I will obey all traffic laws and speed limits.
I will not drink and drive, or use illegal drugs, or drive if I am taking any medication that may affect my driving.
I will not ride with anyone whom I know or suspect is under the influence of alcohol or drugs (legal or illegal).
I will not permit any open or empty containers of alcohol or transport anyone who I know or suspect may be carrying illegal drugs in any vehicle I operate.
I will not ride in any vehicle where I know that there are empty or open containers of alcohol or where anyone who I know or suspect may be carrying illegal drugs.
I agree not to drive with or transport anyone who is in possession of any weapon.
I will always wear my seat belt and shoulder harness. I will not ride in any vehicle in which there are more people than seat belts.
I will make certain that I can always hear emergency vehicles and traffic sounds.
I will drive defensively.
I will not transport passengers unless they are properly secured by a seatbelt.
I will always wear a helmet if I am driving or riding on a motorcycle. I will not transport a passenger unless he or she also wears a helmet.
I will drive in a manner that respects the safety of myself, my passengers, other drivers, and pedestrians.
I will ignore peer pressure. While driving, I am in control. I can stop and ask others to leave my vehicle, and, as a passenger, I can ask a driver to stop and let me out.
I will not drive unless I feel safe and certain of my ability.
I will be especially alert during dangerous conditions such as rain, snow, sleet, wind, heavy traffic, fog, unlit roads, construction zones, and accident scenes.
I will always lock every door and take the keys when I leave the vehicle. I will park in areas where I believe the vehicle will be safe from damage or theft.
I will obey the driving instructions of my parent(s) and of law enforcement officers.
__________________________________________________________
__________________________________________________________
I have read, understood, and will comply with this agreement.
Signed______________________ Witnessed_________________________
Date:_______________________
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Most policies will allow anyone to operate your boat so long as you have given them permission. There are exceptions, of course, especially with high performance boats or personal watercraft so always read your policy.