Citizens Changes Underwriting Guidelines to Include Sinkhole Properties

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Citizens Property Insurance Corporation has recommenced issuing policies on homes with prior sinkhole claims.  The new changes to Citizens’ underwriting guidelines, approved by the Florida Office of Insurance Regulation, now allow policies for properties that have had repairs from prior sinkhole damage.

The underwriting rules require that homeowners be able to prove, with documentation and photographs, that the sinkhole damage on their property has been repaired pursuant to recommendations from approved engineers.  Homeowners who can show that their sinkhole damage has been partially repaired, or repaired using alternative methods can also still be covered under the new policies for some perils, but the new policies may not include coverage for a sinkhole in Florida.

Sinkholes form when limestone dissolves bedrock over time, and the surface land collapses.  Depending on the circumstances, they can be filled with dirt, sand or concrete to support the foundation of a home.  At one time, all Florida homeowner policies were required to have sinkhole coverage, but after years of insurance companies complaining that many sinkhole claims were fraudulent, and sinkhole claims tripling from 2006-2010, the Florida legislature passed a law limiting sinkhole coverage in 2011.

The new insurance coverage availability with Citizens, which went into effect on Oct. 31, is especially significant in Pasco and Hernando Counties, where real estate sales and property values sank in part because an estimated 20,000 properties were not insurable due to sinkhole risk.  Homeowners with prior sinkhole claims did not qualify for property or storm coverage, even if the sinkhole damage was repaired.

Now, homeowners and potential buyers in the Tampa-area counties of Pasco, Hernando, Hillsborough and Pinellas, known collectively as “Sinkhole Alley”, can apply for mortgages that require insurance, when they previously would not qualify due to sinkhole damage.

The announcement for Citizens’ underwriting changes regarding sinkhole properties was made in New Port Richey, Fl. at a Nov. 20 meeting held by the Florida Association for Insurance Reform (FAIR) and the Pasco County and Hernando County Realtors.  In the week before the announcement, two homes in Dunedin, located in Pinellas County, were swallowed by a 90-foot wide sinkhole, and residents in several nearby homes were evacuated until the sinkhole was determined to be stable enough to be filled.

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