What Is Sinkhole Insurance?

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What Is Sinkhole Insurance?

Sinkholes are a gradual process that involves groundwater slowly dissolving rock below the land surface and could cause the land surface to collapse. The results can be catastrophic to your home. While sinkholes are relatively rare in the U.S., they are most common in Alabama, Florida, Kentucky, Missouri, Pennsylvania, Tennessee and Texas.

Even the best home insurance policies won’t cover earth movement such as a sinkhole. You’ll need sinkhole insurance if you want insurance for damage to your house or belongings from this potentially devastating event.

What Is Sinkhole Insurance?

Sinkhole insurance is an insurance policy that usually covers your house, unattached structures (like a shed) and personal property for damage caused by a sinkhole. It’s typically added as an endorsement to a homeowners insurance policy.

Types of Sinkhole Insurance

There are generally two types of sinkhole insurance:

  • Sinkhole insurance as an endorsement to your home insurance. Some states, such as Florida and Tennessee, require home insurance companies to offer sinkhole insurance as an optional coverage. But some insurance companies include sinkhole insurance as part of their policies. For example, Erie insurance includes sinkhole coverage for policyholders in Tennessee.
  • Catastrophic ground cover collapse. This coverage is only available in Florida and home insurance companies in Florida are required to provide catastrophic ground cover collapse. But damage to your house and belongings is only covered if it meets four criteria (more on this below).

Florida and “Catastrophic Ground Cover Collapse”

Florida has more sinkholes than any other state and home insurance companies are required to cover “catastrophic ground cover collapse.” But this can be confusing because catastrophic ground cover collapse is not the same as a sinkhole under Florida law.

Florida law defines a sinkhole as:

A landform created by subsidence of soil, sediment or rock as underlying strata are dissolved by groundwater. A sinkhole may form by collapse into subterranean voids created by dissolution of limestone or dolostone or by the subsidence as these strata are dissolved.

Catastrophic ground cover collapse is defined as a “geological activity” that meets all of the following four criteria:

  1. The abrupt collapse of ground cover
  2. Depression in the ground cover clearly visible to the naked eye
  3. Structural damage to the building, including its foundation
  4. The structure is condemned and ordered to be vacated by a government agency

This means that if your home is damaged by a sinkhole but does not meet all four of the above criteria, your insurance company won’t cover the damage under “catastrophic ground cover collapse.” For example, the house could have foundation cracks but it’s still inhabitable and not condemned by a government agency.

All home insurance companies in Florida are required to offer sinkhole insurance as an endorsement. Your home insurance company could require an inspection of your property before extending coverage. If there is sinkhole activity already present or within a certain distance of the home, the insurance company could decline to offer sinkhole coverage.

If you live in Florida and your home insurance company denies coverage for a sinkhole claim or you disagree with the method of repair, you can participate in the Florida Department of Financial Services’ Neutral Evaluation Program. This program assigns a geologist or professional engineer as a third party to evaluate the existence of sinkhole activity and the method of repair.

What Does Sinkhole Insurance Cover?

Sinkhole insurance pays to:

  • Repair or rebuild your house.
  • Repair or rebuild other structures (like a shed for fence).
  • Repair or replace personal belongings, such as your furniture, rugs, clothes and other possessions.

Sinkhole insurance may also cover repairs to your home’s foundation and stabilizing your home, such as installing structural braces.

Examples of sinkhole damage include:

  • Foundation, window, or door cracks
  • Shifting floors
  • Bulging or bowing walls

If your home is uninhabitable due to structural damage, see if your sinkhole insurance contains additional living expenses (ALE) coverage. ALE can reimburse you for extra costs when you can’t live at home during repairs, such as hotel and restaurant bills.

What Does Sinkhole Insurance Not Cover?

Some examples of sinkhole insurance exclusions include:

  • Damage resulting from mine subsidence.
  • Existing sinkhole damage, like minor cracks in the foundation of a property.

How Does Sinkhole Insurance Work?

To obtain sinkhole insurance, you may be required to have a professional engineer inspect your home or you may need a geological survey. Your insurer could decline coverage based on the results of the inspection or survey.

If you buy sinkhole coverage, you can file a claim with your insurer for sinkhole damage to your house and belongings. You’ll be responsible for your insurance deductible if you make a claim. Sinkhole deductibles can range from 1% to 10% of your dwelling coverage limit.

For example, if your dwelling coverage is $300,000 and you have a 10% sinkhole deductible, your deductible will be $30,000. That means if you have a sinkhole insurance claim of $100,000, your insurance check will be $70,000 ($100,000 insurance claim minus $30,000 sinkhole deductible = $70,000).

How Much Does Sinkhole Insurance Cost?

A sinkhole insurance endorsement in Florida typically costs $2,000 to $4,000 per year, according to Trusted Choice, a group of independent insurance agents.

Your sinkhole insurance costs will depend on factors such as your state and details of your property, like the size of your house.

How to Get Sinkhole Insurance

In Florida and Tennessee, home insurance companies are required to offer sinkhole insurance. But in other states, such as Texas, home insurance companies are not required to offer sinkhole insurance.

Here’s a look at sinkhole insurance in seven states where sinkholes are more common.

  • Alabama. Homeowners in Alabama may be able to purchase sinkhole coverage from their insurers.
  • Florida. Home insurance companies in Florida are required to offer sinkhole coverage. Florida home insurance companies are required to cover “catastrophic ground cover collapse.”
  • Kentucky. Homeowners in Kentucky may be able to purchase sinkhole collapse coverage as an optional coverage type.
  • Missouri. Homeowners in Missouri may be able to purchase sinkhole collapse coverage as an endorsement to their home insurance policies. If you cannot get coverage through your insurer, you may be able to buy a stand-alone sinkhole policy through the Missouri FAIR plan.
  • Pennsylvania. Homeowners in Pennsylvania can request sinkhole coverage from their insurers.
  • Tennessee. Every home insurance company in Tennessee is required to offer sinkhole coverage to homeowners.
  • Texas. Homeowners in Texas may be able to purchase sinkhole coverage as an endorsement to a home insurance policy.

What Causes a Sinkhole?

Sinkholes are most common in regions referred to by geologists as “karst terrain.” Under the surface, these areas are made up of rocks that are easily dissolved by water—such as limestone, gypsum and dolomite. About 20% of the U.S. land surface is karst.

As the rocks dissolve, spaces and caverns develop underground. Sinkholes usually form very slowly and little change is noticed over time, but they can form suddenly when a collapse occurs.

There are three major types of sinkholes:

  • Dissolution sinkholes. These occur in areas where there is little soil or vegetation over limestone or other bedrock. Water from rain and runoff trickle through crevices in the bedrock and dissolve it. Over time, a depression gradually forms.
  • Cover-subsidence sinkholes. These occur in areas where sand covers the bedrock. Individual grains of sand move downward into openings in the rock, gradually causing the land surface to sink. Like dissolution sinkholes, cover-subsidence sinkholes happen slowly.
  • Cover-collapse sinkholes. These occur in areas where the bedrock is covered by a significant amount of clay. These form similar to cover-subsidence sinkholes, but the cohesive nature of clay allows a “bridge” to form above an enlarging cavity. When the overlying cover material can no longer support its own weight, the layer collapses. This can happen abruptly and be catastrophic.

Sinkholes can be triggered by natural events, such as heavy or prolonged rainfall or periods of drought. But sinkholes can also be triggered by human activities, such as:

  • Adding weight above cavities. This includes housing development, construction of roadways or structures, and artificial ponds of water.
  • Overpumping existing water supply wells or drilling of additional wells in the area. This causes the water table to lower and leaves cavern roofs unsupported.

How to Spot Sinkholes

Sinkholes often develop gradually. If you live in a sinkhole-prone area, here are some signs to watch for:

  • Cracks developing around doors and windows.
  • Doors and windows that don’t open and close properly.
  • Deep cracks in the pavement, driveway and walkways.
  • Interrupted plumbing or electricity due to a sinkhole that damages utility lines.
  • A circular depression in your yard or nearby area.
  • Slumping trees or fence posts.
  • Previously buried items like a foundation or fence posts that have become exposed as the ground sinks.
  • Formation of small ponds as rainfall accumulates.
  • Openings in the ground where rainwater disappears.
  • Vegetation that wilts and dies because water is drawn away by a sinkhole.
  • Water well levels that drop suddenly.
  • Muddy or cloudy well water.

What Should I Do if I Have a Sinkhole?

If you live in a sinkhole-prone area, it’s a good idea to talk to your home insurance agent about adding optional coverage for sinkhole damage before it’s too late. Sinkhole damage typically isn’t covered by a standard home insurance policy and you can’t add coverage after damage has been done.

If you believe you have a sinkhole on your property, here are some steps you can take:

  • If you are concerned the sinkhole could affect service lines, such as gas, sewer and water, contact your utility companies.
  • Contact your state geological survey for additional guidance.
  • Consider consulting with a professional land surveyor, hydrologist, geologist or geotechnical engineer to help mitigate damage.

Is Sinkhole Insurance Worth It?

If you live in an area prone to sinkholes, it’s worth considering sinkhole insurance. About 35% to 40% of the U.S. has certain rock types that are prone to sinkholes, according to the U.S. Geological Survey. But catastrophic sinkholes are relatively rare. The states where sinkholes are most common are Alabama, Florida, Kentucky, Missouri, Pennsylvania, Tennessee and Texas.

While the average cost of sinkhole insurance in Florida can range between $2,000 and $4,000 per year, the average sinkhole claim in Florida is more than $140,000, according to Trusted Choice. Without sinkhole insurance, you won’t be covered for sinkhole-related damage to your property.

You may want to consider having a geological survey done on your property to help you determine if your home is at risk for sinkholes.

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