Story Tools

Date of Issue: November 16, 2006

Insurance: New homestead requirement hits Island policyholders

insurance pic

Get ready to learn about another new twist in the way you might - or might not - obtain wind insurance from Citizens Property Insurance Corp., the state's insurer of last resort.

This one breaks down residential property owners into those who have a homestead exemption and those who don't.

A homestead exemption amounts to a $25,000 credit toward the property tax on the appraised value of residential property and to earn the credit, owners must certify that the residence is their primary residence - no rentals allowed.

Nearly two-thirds of the residential property owners on Anna Maria Island may be affected.

Island resident Dale de Haan and others like him are receiving letters from Citizens telling them that they are no longer automatically eligible for wind coverage from Citizens because their properties are not owner occupied or homesteaded.

What's more, the non-homestead property owner who is able to obtain Citizens will be subject to higher premiums than the homesteaded property owner.

 "It is outrageous," said de Haan, who owns a one-bedroom unit at Water's Edge condominium, 5806 Gulf Drive, and has wind insurance on his contents through Citizens. That unit does not qualify for the homestead exemption because he and his wife Ruth reside at Westbay Cove condominium, 600 Manatee Ave., Holmes Beach. Their Water's Edge unit is utilized by other family members and visitors and is rented seasonally.

The new Citizens homestead requirement is particularly ominous for Anna Maria Island, where nearly two-thirds of the residential property are designated as non-homestead by the county property appraiser.

The non-homestead properties typically include second homes, vacation homes and investment properties that are offered for short-term rentals - an important part of the local tourist economy.

"But in the whole big picture of insurance, this is goofy … and discriminatory," de Haan said.

Citizens has sent out about 400,000 letters to policyholders like the de Haans, notifying them that their properties do not meet the homestead exempt requirements and that they may not be eligible for homeowner's coverage on their contents from Citizens in the future.

A non-homestead property owner may still qualify for Citizens, but only if his insurance agent can't find any other authorized insurer for the property. Citizens is the insurer of "last resort."

But non-homestead property owners who end up qualifying for Citizens are going to be "subject to additional policyholder assessments," the letters warn.

The new homestead requirement is the result of a recent state law aimed at protecting full-time homestead property owners from future surcharges by Citizens, according to Rep. Donald Brown, a member of Gov. Jeb Bush's Property and Casualty Insurance Reform Committee.

In the minutes of the committee's Sept. 21 meeting, Brown is quoted as saying that the philosophy of the Legislature was to "assess non-homestead risks first in the event of a deficit before homestead risks would be assessed, in an attempt to help homestead property owners absorb fewer assessments."

Citizens, the state's largest insurer, has 1.3 million policyholders and it had a $1.7 billion deficit from 2005 losses, mostly from hurricane damage. To help reduce the deficit, the Legislature gave Citizens about $750 million in surplus tax dollars. Citizens then sought to cover the balance of the deficit by adding a 2.5 percent surcharge to the insurance premium of all state property owners.

"We have never required a homestead before," said Citizens spokesman Rocky Scott.

He said Citizens has been struggling to establish a data base that would make it possible for the agency to comply with the new law.

The law requiring Citizens to distinguish between homestead and non-homestead properties was approved earlier this year by the Republican-controlled Legislature - the same officials that defeated the amendment proposed by Rep. Bill Galvano to examine the state-designated wind pool for Manatee County and other areas.

Galvano's amendment would have made it possible for many of Anna Maria Island's small businesses, churches and other non-residential property owners to obtain wind insurance from Citizens at more affordable prices. It was defeated in the house vote 57-56.

 Bush signed the state legislation containing the new homestead provision for Citizens in May to take effect March 1, 2007, for new and renewal policies issued by Citizens.

The letters sent to policyholders like the de Haans say that if their property does have homestead status, they must complete and sign a special homestead status form, and mail it to their agent. The agent is supposed to keep the form on file in his office.

In addition to the letters to policyholders, Citizens has sent out thousands of technical bulletins to insurance agents. The bulletins describe the new homestead law, the timeline for its implementation and a list of questions and answers for agents to use in responding to policyholders. Here is one excerpt from that bulletin:

 "What will be the effect on eligibility and assessment through Citizens of having a non-homestead property?

 "Effective March 1, 2007, non-homestead property is not eligible for coverage with Citizens and is not eligible for renewal unless the property owner provides us with a sworn affidavit stating that the agent has made his or her best effort to obtain coverage and that the property has been rejected for coverage by at least one authorized insurer and at least three surplus-lines insurers.

"If a deficit is incurred, the Citizens' board of governors shall levy an immediate assessment against the premium of each non-homestead property policyholder, up to 10 percent of the premium. If this assessment is insufficient to eliminate the deficit, the board of governors shall levy an additional assessment against all policyholders, up to 10 percent of the premium."

In its bulletin, Citizens defines homestead property as including the following:

  • Property that has been granted a homestead exemption in keeping with state law.
  • Any county, district or municipal hospital.
  • "Commercial lines residential property," which insurance experts translate to mean residential condominium buildings.

The eligibility of a residential condo unit owner for homeowners or content coverage from Citizens would depend on whether that person has homestead status for that unit's address.

The new homestead requirement for Citizens insurance places an additional burden on thousands of Anna Maria Island property owners.

Of the 5,903 residential parcels of condos, duplexes and single-family homes on the Island, only 2,208, or about 37 percent, have homestead status, according to the Manatee County Property Appraiser, based on the agency's latest statistics.

The county says that 3,695, or nearly two-thirds, are non-homestead residential properties.

Of the three cities on the Island, Bradenton Beach has the lowest percentage of residential homesteaded properties. Only 19 percent of its 1,342 residential properties are homestead, compared to 40 percent for Holmes Beach and 48 percent for the City of Anna Maria.

De Haan argues that the owners of second or third homes typically rent them for at least a portion of the year and "are, in a sense, small business people who have invested in the community and should not be penalized by this homestead requirement."

He said that the non-homestead property owners are part of the local economy.

The "whole homestead thing is some kind of game," he said. "It is very confusing and it is why people are throwing up their hands."

City Residential
Anna Maria City Condominium
Single Family
Bradenton Beach Condominium
Single Family
Holmes Beach Condominium
Single Family
Totals   2,208 3,695 5,903

Source: Manatee County Property Appraiser November 2006

Insurance reform report available online

The governor's insurance reform committee is scheduled to meet in Tallahassee Wednesday, Nov. 15, to finalize their recommendations to mend the state's broken property insurance system.

In establishing the committee, Gov. Jeb Bush asked for ideas to "improve competition and create incentives for private insurance and reinsurance in the areas of residential, commercial, manufactured homes, condominiums/apartments, and government entities." He also asked for ways to depopulate Citizens Property Insurance Corp., the state's insurer of last resort, and suggestions on how to encourage homeowners and businesses to strengthen their homes.

The committee has responded with a 115-page report intended to help the governor and the state Legislature focus on specific actions. To see the committee's report, go to and click "Interim Report."