In some places like central Florida, it’s amazing that anyone would choose to build a home. If you build a home in a swamp, it’s likely to eventually get swallowed up. Just ask the king of Swamp Castle. When it does, you could be facing a severe loss under a new Florida law that kicked in on January 1.
New Sinkhole Law
Under the new law, changes are coming to the way insurance companies can provide sinkhole insurance. The law is designed to help reduce the cost of homeowners insurance premiums for most Floridians, but it may wind up hurting those folks who happen to find their homes being swallowed up by the earth.
The new law lets private insurers change policies to drop portions of sinkhole coverage. This could ultimately cut premiums for residents of some sinkhole-prone areas. Their premium rates could drop by as much as half. The state-run insurance company, Citizens Insurance, has done this for more than a year now.
Why it Rocks
Proponents of the law point to the money that’s been saved in insurance premiums. It’s estimated that as much as $54 million has been saved in premiums. Unfortunately, it isn’t yet certain how many people have found themselves the victim of a sinkhole without any recourse.
Why it Sucks
Opponents of the law suggest that it’s actually harmful to homeowners. The law still requires policies to cover major catastrophic ground collapses, but it doesn’t force them to cover more minor issues caused by sinkholes such as settlement distress or cracking.
The Truth of the Matter
Consumers can keep the additional coverage at an additional cost. In addition, insurance companies are required to notify residents as to which kind of coverage was dropped. Advocates of the law point out that it doesn’t limit consumers in the type of coverage that they can buy, rather it helps consumers who don’t need sinkhole coverage by dropping their premiums, by a significant percentage in some cases.
If you live in an area prone to sinkholes, you might consider continuing the coverage. That way, if the unthinkable happens, you can rebuild. In some instances, you may be able to add a specific rider that will include sinkhole coverage, or at least certain types of damage to your home that can occur from sinkholes.
Photo via Foxtongue
