In a number of states including Florida, homeowners who have sinkhole coverage on top of their regular home insurance coverage face higher rates than ever before. The reason is the growing number of fraudulent claims for sinkhole damages. These claims are costing insurance companies exorbitant amounts of money and causing them to hike up insurance rates on sinkhole coverage. Typically, a homeowner who wants to file a claim for sinkhole damage notifies his insurance company, which then investigates the matter. If sinkhole activity is confirmed, the insurance company issues a check to the policyholder but doesn't follow up on how the compensation is spent. Apparently, this has led to misappropriation of the funds and an increase in claims as a way of getting some fast cash. However, the fraudulent behavior of some homeowners is costing the honest majority serious money to the point where getting sinkhole coverage in addition to regular home insurance coverage is becoming too expensive for most.
Why Changing Homeowners Insurance Won't Help
Homeowners insurance rates are in large part determined by the number of claims in a single area, and insurance companies are starting to take action to combat this kind of fraud and contain the amount of claims upheld for sinkhole damage. Instead of writing a check to the policyholder, some are now only issuing checks directly to the companies that perform the sinkhole repairs. Without the money ever entering their possession, homeowners that intend to abuse the system are effectively prohibited from doing so.
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