When deciding which insurance company is the correct fit for your needs, people usually consider which premium is the lowest. Rarely considered is the ability of the insurance company to fulfill its obligation under the contract in a reasonable period of time.
Florida has admitted and non-admitted insurance companies doing business in the state.
Admitted markets are required to file their rates with the state and participate in the Florida Insurance Guarantee Association. Policyholders insured by these carriers will have their claims handled by the association if the carrier were to become insolvent.
Covered claims are subject to the lesser of the policy limits or up to a maximum cap of $500,000 when both dwelling and contents are included in the claim.
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The non-admitted carriers are not required to file their rates with the state and don’t enjoy the benefit of Florida Insurance Guarantee Association participation. These carriers however, are typically large, financially strong, AM Best A-rated carriers.
Ultimately, the homeowner would do best by choosing a carrier that is both admitted and AM Best A-Rated.
Unfortunately, many homeowners will not have this option available due to the tight underwriting guidelines of these carriers, often requiring dwelling values greater than $1 million and/or newer construction meeting the most current building codes. Pending legislation, if passed, may encourage more carriers possessing these qualifications to enter the state and offer coverage.
The next option is to purchase coverage from a non-admitted, AM Best A-rated carrier. This carrier, based on the investigation of the rating agency, should have the capacity to pay losses in the event of a claim. On average, the premiums are slightly higher, they possess the financial strength needed to meet their obligations but have no protection from the Florida Insurance Guarantee Association.
Option three is the admitted, non-AM Best rated carrier. These carriers typically offer competitively priced coverage to a wide range of homeowners providing an alternative to the state run insurer of last resort, Citizens Property Insurance Corp. These carriers do participate in the Florida Insurance Guarantee Association.
This is a more palatable option for the homeowner with combined limits for the dwelling and contents under the $500,000 maximum cap of the association than for the consumer with a $1 million home to insure.
The fourth and final option is Citizens. Some homeowners may find this is the only insurer willing to provide coverage due to certain circumstances related to the home or its use. Some might choose this option feeling comfort in the fact that the citizens of Florida are the insurance company and insolvency is supposedly not an issue. Much debate is under way in an effort to figure out how to adequately fund Citizens and restore the premiums to reflect an actuarially sound rate.
Anthony Smith, managing partner of Smith, Reed & Osmond Insurance in Bradenton, can be reached at (941) 792-3300 or by e-mail at Anthony@ sroinsurance.com.