I just went through this (rate increase) and this is what I found in my research in talking with people at AAA as well as The Villages Insurance:
Every policy in Florida is required to have "catestrophic" sink hole coverage. This is included in the basic price of the policy and typically will have the same deductible as you would for any other sort of loss (except hurricane which will have a higher deductible). This covers you in the case a sink hole suddenly opens up and makes your house unliveable (as defined by the county, I believe.) There are certain conditions that must be met for this to apply (e.g., house unliveable, sudden versus slowly over time, etc.)
In addition, you can buy an additional rider for sink hole coverage which covers you in the cases not covered by the above conditions. This is the component whose price is very high and which, going forward, has the extremely high deductible. This high deductible was actually madated by law. The reason for it (as explained to me) is that many homeowners were taking advantage of sinkhole coverage to get minor cracks, etc. repaired in their houses. They would work the system like this: They would make a claim on their sinkhole coverage that a sinkhole has caused minor damage to their homes. The insurance company would then have to hire geophysical engineers to evaluate whether there was a sinkhole. These evaluations were extremely expensive ($12-15K). Because of this, the insurance companies found it cheaper to just pay the claims rather than pay for the evaluations. So, in the end, the homeowners were able to get the insurance companies to pay for minor cracks and normal settling damage.
By raising the deductible to $20,000 or whatever it works out to on an individual property, this scam is avoided. However, since catestrophic coverage for sinkhole is already covered (with a very nominal deductible), it makes me question the additional value of the sinkhole rider for non-catestrophic damage since there's a good chance that such damage will be less than the deductible, anyway.
|