Southern Fidelity Insurance just left 120,000 people without home insurance

Here's how homeowners in Florida and Louisiana can find a new home insurance policy in the middle of hurricane season.

Kara McGinley

By

Kara McGinley

Kara McGinley

Senior Editor & Licensed Home Insurance Expert

Kara McGinley is a senior editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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Getty. Carl and Ann Purcell

This hurricane season is already hitting many homeowners in the South harder than others, and we aren't even at the peak of hurricane season yet. Approximately 120,000 homeowners in Louisiana and Florida are rushing to find new homeowners insurance coverage after Southern Fidelity Insurance was deemed insolvent on June 15. 

After the ruling, policyholders in Florida received written notice that they needed to secure new coverage by July 15 — and those in Louisiana received similar information. Southern Fidelity also has policyholders in South Carolina and Mississippi, albeit not as many as Louisiana and Florida. South Carolina homeowners received the same 30-day cancellation notice. The Mississippi Insurance Guaranty Association has not published any information about the Southern Fidelity liquidation process yet, according to Mark Friedlander, spokesman for the Insurance Information Institute

The ruling leaves many homeowners without insurance ahead of the most active months of what experts are predicting will be an above-average and expensive Atlantic hurricane season. But they do have some options.

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What does this mean for Southern Fidelity policyholders in Florida?

Southern Fidelity is the fourth Florida-based home insurer to be declared insolvent in the past four months, says Friedlander. And 11 others have declared moratoriums on writing new business in different parts of the state. 

This leaves most Florida homeowners with no other choice but the state-backed, last-resort coverage option: Citizens Property Insurance Corporation. And the same will likely go for ex - Southern Fidelity policyholders. 

“In most cases, Southern Fidelity customers will be placed with Citizens, although there may be some private market options,” says Friedlander. 

But what about any outstanding claims or pre-paid premiums? “Outstanding claims of Florida customers will be processed by the Florida Insurance Guaranty Association (FIGA),” says Friedlander. “FIGA indicates it will process premium refunds within 45 to 60 days after the liquidation process began.” Unfortunately, there’s no way to expedite the process. 

What does this mean for Southern Fidelity policyholders in Louisiana?

Southern Fidelity policyholders in Louisiana can also get coverage through Citizens Louisiana — their state-backed option of last resort. And although the written notice from Southern Fidelity gave a deadline of July 15, the Louisiana Insurance Commissioner says policyholders have a bit more time.

“Citizens is offering Southern Fidelity policyholders 60 days of coverage beyond the deadline date [of July 15], with retroactive effectiveness of those policies. They can take a Citizens policy today and continue to shop for private coverage elsewhere and cancel that policy if they get a new one. Or they can keep the Citizens policy in place,” says Louisiana Insurance Commissioner Jim Donelon

That means Southern Fidelity policyholders can get coverage through Citizens until Sept. 13, 2022. And, according to Donelon, those policies are being retroactively backdated to the Southern Fidelity original deadline of July 15.

“Even if we have a hurricane between now and [Sept. 13], that will be covered during that 60-day extension period if [homeowners] get coverage through Citizens,” says Donelon. 

When it comes to outstanding claims, they will be handled by the Louisiana Insurance Guaranty Association (LIGA). Homeowners in Louisiana are going to have to wait a bit longer to receive their refunds and outstanding claim payouts than those in Florida — LIGA has to wait on the unearned premium data to be sent from Florida before moving forward with cutting checks.

LIGA expects to receive the information some time between Aug. 15 and Sept. 15, and will issue refunds as soon as possible once they receive the data from Florida, says Donelon.

What happens if you’re left without coverage? 

If you’re one of the homeowners that lost coverage with Southern Fidelity, here’s what to do in the coming days and weeks to ensure your home is financially protected.

Reach out to your agent for help

Southern Fidelity works with independent agents in both Louisiana and Florida, and many times these agents also work with Citizens Insurance and private insurers. Friedlander advises that you contact your agent for help with securing coverage with either Citizens Louisiana, Citizens Florida, or a private insurer. 

Get a policy through Citizens Insurance

Citizens Insurance provides Fair Access to Insurance Requirements (FAIR) Plans in Florida and Louisiana. While these are last-resort coverage options, Citizens has actually become the largest insurance company in Florida due to so many insurers issuing moratoriums or becoming insolvent.

Louisiana homeowners should expect to pay more with Louisiana Citizens than they paid for Southern Fidelity coverage. “Louisiana regulations require its Citizens Property Insurance Corporation to charge a higher average premium than all private insurers so that it truly is an insurer of last resort,” says Friedlander. 

Meanwhile, homeowners in Florida may see slightly cheaper — or varying — rates. “Florida’s Citizens Property Insurance Corporation typically charges less average premium than most private insurers, as it is rate-capped at 11% annual increases. However, the Florida regulator recently reduced its rate change request to a 6.4% average after the company had requested a 10.7% average increase,” says Friedlander. 

Your mortgage company may choose their own insurance

In Louisiana and Florida, if you have a mortgage on your home, your lender will require you to have homeowners insurance and wind coverage. If you can’t get coverage by the deadline of July 15, your lender may initiate force-placed insurance, says Friedlander. 

This is when your mortgage lender places you with an insurance carrier, and it’s typically more expensive than when you purchase insurance on your own. 

If you don’t have a mortgage, still try to find coverage

Homeowners insurance isn’t required by law, so if you don’t have a mortgage, you can technically go without it. But that’s not advised, especially in high-risk states like Florida and Louisiana. 

“If you don’t have a mortgage, we strongly recommend you secure insurance coverage at the same level that you had previously to ensure you are financially protected from hurricane damage and other typically covered perils such as fires, tornadoes, and lightning strikes,” says Friedlander. 

Image: Carl & Ann Purcell / Getty

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Author

Senior Editor & Licensed Home Insurance Expert

Kara McGinley

Senior Editor & Licensed Home Insurance Expert

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Kara McGinley is a senior editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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