State Limits Citizens’ Coverage of Coastal Properties

by Isaac Benmergui, Esq on May 8, 2013

tug of war_edited-1Real estate and insurance experts aren’t sure the State legislature should have limited Citizens Property Insurance Corp.’s ability to cover coastal properties quite as aggressively as they did.

The legislature approved changes to the state-run insurer in order to enroll fewer new client that could make a claim when a major storm hits the area. New enrollees would have to look into other insurance companies before they’d be permitted to use Citizens.

The reform includes reduction of the maximum coverage from $2 million to $1 million, and then over three years phase down to $700,000 Peter Zalewski, managing principal of Condo Vultures says, “Citizens Property Insurance reform couldn’t come at a worse time. Just as the South Florida real estate market is recovering from the downturn and things are gaining momentum the Legislature is taking steps to curve the recovery.”

Zalewski believes that when investors have to choose private insurance that will increase premiums, they’ll think twice about buying. Investors take all expenses into account when buying a condo looking to rent it out.

The reform bill also forbids Citizens from covering new coastal construction after July 1, 2014, which could impact many projects and buyers in Miami Beach, Sunny Isles Beach and coastal Broward and Palm Beach counties. Private insurance companies don’t always want to cover the coastal areas because it makes them vulnerable to claims when storms hit, and they always hit every few years.

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