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Consumer Q&A On State Farm's Exit From Florida

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By RUSSELL RAY | The Tampa Tribune

Published: February 27, 2009

Updated: 02/27/2009 10:26 am

When will State Farm drop my policy?

The company must give you six months notice before dropping your policy. State Farm can begin issuing nonrenewal notices in May following a 90-day review by state regulators. Under State Farm's plan, the company will drop all property insurance policies over a two-year period beginning in November. About 470,000 policies, including all boat-owner policies, will be dropped during the first year. Those policies will be dropped at renewal time.

Will I be charged a penalty if I cancel my State Farm policy early?

Under the withdrawal plan approved by Insurance Commissioner Kevin McCarty, State Farm is prohibited from assessing penalties for early cancellations. But State Farm hasn't yet agreed to McCarty's plan. Even so, the company doesn't charge customers penalties for the early cancellation of a homeowner policy. It does, however, assess a $25 penalty against new auto policies that are cancelled within the first six months.

Will I be able to find replacement coverage at an affordable price?

If you have an older home or live in an area where sinkhole risk is high, it may be difficult to find a private insurer willing to provide coverage. If you do find alternative coverage in the private market, the new rate will likely be higher.

If you have a newer home in a low-risk area, your chances of finding coverage at a lower rate are good. However, your chances of finding replacement coverage could sink if the state Legislature doesn't find a way to fully fund the state's $29 billion Hurricane Catastrophe Fund. Demotech, which rates insurance companies, said it will cut the credit ratings of Florida insurers if the state can't obtain enough money for the fund. If that happens, insurance companies wanting to take over State Farm policies may not be able to raise the cash it needs to add more policyholders. Also, mortgage may require you to switch to an insurer with a higher rating.

Will I lose my discount on my automobile insurance when State Farm drops my homeowner policy?

If you purchase your new homeowner policy from the same State Farm agent, you will not lose your automobile discount. However, that could change, because State Farm's withdraw plan has not been finalized by regulators. Depending on what the final agreement looks like, customers could lose those discounts.

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