Alyssa Lane
In the state of New York, insurance companies are required to collect a fire insurance fee from policyholders for coverage of the peril of fire. This fee is imposed at a rate of 1.25% on the gross direct premium written on property or risks located in the state. The fire insurance fee is not imposed on policies that insure against perils such as inland marine, ocean marine, automobile, or aircraft physical damage. The fee is typically paid quarterly by insurance companies to the superintendent and is separate from other fees such as the New York State assessment fee and the Workers' Compensation Security Fund surcharge. The fire insurance fee must be included on the declarations page of the policy and can be submitted online through a secure portal or through the OPTIns system.
| Characteristics | Values |
|---|---|
| Who should collect the fee? | Every insurance company authorized to do business in New York State |
| Who should pay the fee? | Each policyholder |
| What is the rate of the fee? | 1.25% on the gross direct premium |
| What is the payment frequency? | Quarterly |
| What is the deadline for the annual statement? | 15th of February of each year |
| Is the fee subject to premium tax? | No |
| Is the fee refundable? | Yes |
| How is the refund calculated? | According to the insurer's applicable rate filing or the provisions of the insurance contract |
| What is the submission method? | Online via the Department of Financial Services' secure portal, the OPTIns system, or Form OFM-5 |
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What You'll Learn
Fire insurance fee calculation methods
Fire insurance fees are calculated based on specific methods and regulations. The calculation method depends on various factors, including the type of insurance policy, the date of issuance, and the presence of divisible premiums for property and liability coverages. Here is an overview of the calculation methods:
Calculation Method for Pre-2002 Policies:
Before 2002, commercial multi-peril insurance policies commonly had indivisible premiums for property and liability coverages. In such cases, the fire insurance fee was calculated based on a percentage of the total premium. For instance, if the total premium was $2,418, the fee could be determined by multiplying it by 50% ($1209), and then applying the statutory percentage of 1.25%, resulting in a fee of approximately $15.12.
Calculation Method for Post-2002 Policies:
Since 2002, insurance policies have changed to include separate, divisible premiums for property and liability coverages. In this case, the calculation method is different. For business owners' policies with divisible premiums, the fire insurance fee is calculated by multiplying 100% of the property premium by 1.25%N.Y. Ins. Law § 9101(b) (McKinney 2000) and Insurance Law § 9108(b)(1).
Exceptions and Special Considerations:
It is important to note that the fire insurance fee should not be levied on portions of the property premium that do not include the peril of fire. Additionally, if inland marine coverage is included in a business owners' policy, and the premium for such coverage is divisible, that portion of the premium is exempt from the fire insurance fee as per Insurance Law § 9108(b)(1).
Determining Fire Portion for Multi-Peril Policies:
In cases where a multi-peril policy includes fire coverage, but the actual fire portion cannot be determined, accepted fire portions are specified. For commercial multiple peril policies, the accepted fire portion is 50% as mentioned in Circular Letter No. 19 (1982).
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Fire insurance fees and policy cancellations
Fire insurance fees are calculated based on the property's risk of fire and the cost of rebuilding or repairing fire damage. The fees are typically a percentage of the property's premium, and they vary depending on the specific policy and location. For example, in New York, the fire insurance fee for business owners' policies with separate, divisible premiums for property and liability coverages is calculated by multiplying 100% of the property premium by 1.25%. On the other hand, in California, the average annual policy cost for the FAIR Plan was around $3,200 in 2022 and is expected to have increased since then.
It is essential to understand the terms of your fire insurance policy, as some policies may not provide adequate coverage in the event of a fire. It is recommended to shop for a policy that adequately insures your dwelling for a total loss fire and includes coverage for building code upgrades and extended replacement costs. Additionally, policyholders should be aware of their rights and options in the event of a policy cancellation. Insurance companies are required to provide a certain amount of notice before cancelling a policy, and policyholders may have the option to reverse the decision or find alternative coverage.
In the context of California's recent wildfires, insurance companies have been instructed to pause policy cancellations and non-renewals for a year for people affected by the fires. This moratorium provides protection and allows homeowners to focus on recovery without the immediate threat of losing their coverage. However, it is important to note that insurance rates may still increase over time. Homeowners are encouraged to review their coverage and consider their options for alternative insurance providers if necessary.
While insurance companies have the right to cancel or non-renew fire insurance policies, there are steps that policyholders can take to protect themselves. Firstly, contact your insurance provider to understand the reason for cancellation and explore options for finding new coverage. Additionally, consider implementing fire mitigation measures such as installing fire-resistant roofing, clearing defensible space, and upgrading windows and vents to reduce your property's risk of fire damage.
In summary, fire insurance fees and policy cancellations are complex issues that require careful consideration. Policyholders should be proactive in understanding their coverage, rights, and options to ensure adequate protection in the event of a fire. Additionally, staying informed about local regulations and resources, such as moratoriums on policy cancellations in areas affected by wildfires, can provide crucial support during challenging times.
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Fire insurance fees and policy refunds
Fire insurance fees are paid quarterly by insurance companies to the Department of Financial Services, after deducting gross premiums, including premiums upon policies not taken and premiums returned on cancelled policies. Insurance companies can submit the Fire Insurance Fee online via the Department's secure portal or through the Online Premium Tax for Insurance system (OPTIns) offered by the National Association of Insurance Commissioners (NAIC).
The method for calculating the fire insurance fee for a business owner's policy with separate, divisible premiums for property and liability coverage is to multiply 100% of the property premium by 1.25%, subject to specific exceptions. If the actual fire portion of a multi-peril policy cannot be determined, the accepted fire portions for homeowners and commercial multiple peril policies are 35% and 50% respectively.
In the case of policy refunds, if the policy is cancelled by the insurer, the refund of the fire insurance fee must be calculated on the same basis as any return of premium. If the policy is cancelled by the insured before the expiration of the insurance contract, the refund of the fire insurance fee is calculated according to the insurer's applicable rate filing, or in accordance with the provisions of the insurance contract. If the premiums are financed under a premium finance agreement, the authorized insurer must return the premiums on a pro-rata basis.
In New York, insurance policies or premium notices must separately state a fire insurance fee, a New York State assessment fee, and a Workers' Compensation Security Fund surcharge on the declarations page of the policy. Upon cancellation of a policy by the insured, the fire insurance fee and the New York State assessment fee must be refunded by the insurer on the same basis as any other return of premium.
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Fire insurance fees and policy surcharges
In the state of New York, insurance companies are required to collect a fire insurance fee from policyholders for coverage against the peril of fire. This fee is imposed at a rate of 1.25% on the gross direct premium for property or risks located within the state. The fire insurance fee is separate from the applicable premium charge and must be identified and charged to each policyholder.
The fire insurance fee applies to both homeowners and commercial multiple peril policies. In cases where the actual fire portion of a multi-peril policy cannot be determined, the accepted fire portions of the premium are 35% and 50% for homeowners and commercial policies, respectively. This means that the fire insurance fee is levied on these portions of the premium.
Insurance companies in New York are required to submit the Fire Insurance Fee Exhibit as part of the New York Supplement to the Annual Statement. This can be done online through the Department of Financial Services' secure portal or through the Online Premium Tax for Insurance system (OPTIns) offered by the National Association of Insurance Commissioners (NAIC).
It is important to note that the fire insurance fee is not levied on certain types of coverage, such as equipment breakdown, inland marine, ocean marine, automobile, or aircraft physical damage. In the case of businessowners policies (BOP) with separate, divisible premiums for property and liability coverages, the method for calculating the fire fee is to multiply 100% of the property premium by 1.25%.
The fire insurance fee is considered separate from other costs such as premium tax and must be refunded on a pro-rata basis if the policy is cancelled by the policyholder. It is also important to note that an insurance policy may be cancelled for non-payment of the fire insurance fee, and upon cancellation, any fees and surcharges must be refunded.
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Fire insurance fees and policy taxes
Fire insurance fees are levied on property insurance policies that cover the peril of fire. In New York, insurance companies are required to collect fire insurance fees from policyholders, which are then paid to the superintendent or the Department of Finance, depending on the jurisdiction. The fee is typically imposed at a rate of 1.25% on the gross direct premium for property located in the state. However, it's important to note that this fee excludes policies for protecting household furnishings and specific types of buildings, such as residential structures, schools, churches, and hospitals.
The calculation method for fire insurance fees can vary depending on the structure of the insurance policy. For business owners' policies with separate, divisible premiums for property and liability coverages, the fee is calculated by multiplying 100% of the property premium by 1.25%. On the other hand, for multi-peril policies where the actual fire portion cannot be determined, the accepted fire portion for homeowners and commercial policies are 35% and 50%, respectively.
In New York City, there is an additional fire premiums tax, commonly known as the Foreign Fire Tax. This tax is imposed specifically on foreign insurance companies, with a rate of 2% on the gross premiums. It is important for out-of-state insurers to be aware of this additional tax, as non-compliance can result in hefty assessments and penalties. To assist insurers in complying with the tax, New York City offers a voluntary disclosure program that allows taxpayers to minimize their exposure and avoid penalties for past-due taxes.
Fire insurance policies are crucial for businesses to protect themselves from the financial burden of repair or damage costs associated with fires. Commercial building fire insurance provides coverage for various types of fire-related damage, including heat, smoke, and flames. Without this insurance, business owners may be responsible for significant out-of-pocket expenses, which could have long-term financial implications for their companies.
In summary, fire insurance fees and policy taxes are essential components of the insurance landscape in New York. These fees and taxes help support firefighting efforts and provide financial protection for businesses and property owners in the event of a fire. By understanding the applicable fees and taxes, insurance companies and policyholders can ensure compliance and take advantage of the financial safeguards provided by these policies.
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Frequently asked questions
The New York fire insurance fee is a levy imposed on insurance companies operating in the state. It is calculated at a rate of 1.25% on the gross direct premium written on property or risks located in the state.
The fee is used to fund fire prevention and protection services in the state, such as the New York Fire Patrol.
Insurance companies are required to submit the Fire Insurance Fee Exhibit as part of the New York Supplement to the Annual Statement. This can be done through the Department of Financial Services' secure portal or the Online Premium Tax for Insurance system (OPTIns).
