Early this week, Florida’s Citizens Property Insurance proposed massive rate increases for sinkhole coverage. On average, policies would be impacted by an increase of 428% throughout the state. The proposal was seen as excessive by many consumer advocacy groups, but the insurers that make up the state-run program argue that higher rates are needed to combat fraud. Despite the best efforts of opponents, the proposals were passed as part of Senate Bill 408.
Now that the new rates have been approved, Florida residents can expect to pay a lot more for sinkhole coverage. Normally, policies covering areas of low risk – inland communities etc. – the cost of such coverage is a mere 68 cents. Now, however, the price will leap to $44. In coastal areas, rates are being raised by an average of 810%, bringing premiums up from $441 to $4,017.
The new rates will make it more difficult to buy a home in the state. Most banks require sinkhole coverage if buyers want to obtain a mortgage. The high rates will put such coverage out of reach of the average homeowner, meaning that they will be unable to finance their home.
According to Citizens, the rate increases are “painful but necessary,” and will serve to curb the tide of fraud in the state as well as ensure the insurance program has enough financial support to weather any damages from natural disasters.