You may have heard in the news that Citizens is raising sinkhole coverage rates significantly in January due to new legislation regarding sinkhole coverage. Florida Insurance Commissioner Kevin McCarty approved an average statewide increase of 32.8 percent, which still will pinch many homeowners but is far from the absurd 447 percent increase Citizens initially sought. I personally called my insurance agent to get the scoop and found out that a new policy I had just been issued on one of my rental properties didn’t have sinkhole coverage – so I immediately told him I needed to add it. Preferably not through Citizens. According to my insurance agent, the rate hike only applies to the sinkhole portion of a homeowner’s insurance policy. For example, my premium right now is $723. If my sinkhole policy would normally run $150, it will increase $57 per year to $207. According to him, Citizens appears to still the best deal in town when he compared their rate to other independent companies.
However, since I added sinkhole coverage to my existing policy after October 1, I was required to get a sinkhole inspection to the tune of $180. Citizens pays half and I paid half, but the fee is non-refundable even if Citizens turns down the sinkhole coverage application due to something answered “Yes” on the application. On mine I was asked questions like “Are you aware of any existing sinkholes in the surrounding neighborhood?”
While the inspection is a new requirement for the state-owned property insurer, many private insurers already require sinkhole inspections. The change applies to all new policies in the affected areas – both existing homeowners applying for first-time sinkhole coverage and people planning to buy a home. Homeowners who currently have sinkhole coverage through Citizens do not need to schedule an inspection.
The new rule is effective for home purchases in four Florida counties: Hernando, Hillsborough, Pasco and Pinellas.
According to Citizens, a negative sinkhole inspection does not automatically disqualify a home from coverage, but it makes the approval process more complicated. As a Realtor, I recommend that buyers who are putting an offer on a home use the correct addendum in to the Florida Real Estate contract that allow a buyer to withdraw from a purchase if they cannot get ‘comprehensive’ homeowner’s insurance at an agreed upon price. This process may also slow down closing time frames so it is recommended to get your sinkhole inspection done as soon as you know you have a contract as getting a sinkhole inspection report could take up to 30 days. This will slow closings down even on cash deals if the buyer wants homeowners coverage with sinkhole protection.