Sinkhole Insurance Coverage

Though rare, sinkholes can be catastrophic. Unfortunately, many homeowners don’t realize that their insurance doesn’t automatically cover sinkhole damage — until it’s too late.

Here’s what you should know about sinkholes and sinkhole insurance.

Does homeowners insurance cover sinkhole damage?

From an insurance perspective, the most important thing to know about sinkholes is that standard home insurance typically does not cover the damage they cause. However, many insurance companies offer sinkhole coverage as an endorsement to an existing policy, and some companies offer sinkhole insurance as a stand-alone policy.

Florida and Tennessee are the only states that require insurance companies to offer sinkhole coverage, though only on an optional basis. Florida is the only state that requires homeowners insurance policies to include coverage for catastrophic ground cover collapse (CGCC).

What is the difference between sinkhole insurance and CGCC?

If you live in Florida, you should know that CGCC only kicks in when a situation meets all four of the following criteria:

• The damage is the result of an abrupt collapse of ground cover.
• A depression or hole in the ground is clearly visible to the naked eye.
• There is structural damage to the covered building.
• The insured structure is condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order.

In other words, unless a sinkhole forms a visible hole in the ground and leaves your home uninhabitable, CGCC coverage won’t apply. A sinkhole insurance policy, on the other hand, will usually cover repairs to a sinkhole-damaged home that remains inhabitable, provided the damage meets other specified criteria.

How does sinkhole insurance work?

Most sinkhole insurance policies can provide coverage for your home and belongings, but the specific terms and limitations vary by state and carrier. Sinkhole damage to your car is covered separately by your car insurance policy, if you have comprehensive coverage.

Insurance companies often inspect homes for signs of sinkhole activity prior to issuing sinkhole coverage. If your property has signs of sinkhole activity or is near a sinkhole, your application for coverage may be denied.

Some sinkhole endorsements and policies exclude man-made sinkholes.

Here are key things to consider as you compare quotes on sinkhole insurance coverage:

• Dwelling coverage: A typical home insurance policy covers your home on a replacement cost basis, which allows you to repair or rebuild to like-new conditions. Some sinkhole insurance policies insure your home at its actual cash value, which deducts depreciation from a claim.
• Other structures: Standard homeowners insurance usually includes coverage to repair or replace other structures on your property, such as a detached garage or shed. Some sinkhole policies limit this to inhabited structures only. Assess your needs accordingly.
• Personal property: Standard homeowners insurance covers your belongings at your policy’s stated limit, which usually adds up to at least 50% of your dwelling limit. Whether you purchase a sinkhole endorsement or stand-alone policy, make sure your personal property is also covered.
• Loss of use: Loss of use covers your temporary living expenses while your home is being repaired after a covered loss. Considering the potential for sinkhole damage to leave your home uninhabitable for an extended period, this coverage could prove invaluable.

Additional insurance considerations in states with sinkhole activity

Florida

If you’re buying a home in Florida, the seller is required to disclose any prior sinkhole claims. The state’s Department of Finance recommends contacting an insurance agent before you buy, to make sure the home is insurable. Insurance companies can deny coverage to homes with existing or potential sinkhole damage.

Florida laws also specify that sinkhole coverage only applies to damage to a home’s structural support system. “A crack stretching across an interior wall or floor tiles popping up from the home’s foundation may not constitute ‘structural damage,’” according to the Department of Financial Services.

Missouri

As an alternative to other forms of sinkhole coverage, Missouri homeowners can purchase stand-alone sinkhole insurance through the state-backed FAIR Plan.

The dwelling limits in FAIR Plan sinkhole policies max out at $200,000, and coverage is only offered on an actual cash value basis. This might not be enough to cover the entire cost of repairs, particularly for high-value homes. But the premiums are quite affordable.

Pennsylvania

Limestone bedrock makes areas in south-central and southeastern Pennsylvania particularly susceptible to sinkholes, and sinkhole coverage is available from private insurers. In communities built above abandoned mines, homeowners can purchase mine subsidence coverage through the state’s Department of Environmental Protection.

Tennessee

Tennessee’s insurance laws require insurance companies to offer optional sinkhole insurance that includes coverage for a customer’s home, additional structures and personal property.

Though rare, some insurance companies operating in Tennessee, such as Erie, include sinkhole coverage in their standard home insurance policies at no extra cost.

What is a sinkhole?

There are a few different types of sinkholes. Many occur naturally, but some are man made. Regardless of the cause, the damage they cause can be catastrophic.

Natural sinkholes typically occur in areas that sit on water-soluble bedrock, such as limestone, gypsum or dolomite. Over time, groundwater eats away at the bedrock, creating caverns or other openings. Gradual sinkholes occur when surface soils slowly sink into these openings. Abrupt sinkholes occur when these openings weaken bedrock to the point of collapse.

Man-made sinkholes are usually the result of activities that create voids in underground soils, such as when a water main breaks or after groundwater is pumped to the surface.

Regardless of the cause, a sinkhole that forms under or near a home can compromise its structural integrity and jeopardize the safety of its occupants. In 2013, a 37-year-old man was killed when his bedroom collapsed into a sinkhole under his home near Tampa, Fla.

What are the signs of a sinkhole?

While sinkholes are tough to predict, experts at the University of Florida advise homeowners to watch for these signs of potential sinkhole activity:

Inside a home or building

• Cracks in walls and floors.
• Muddy or cloudy well water.
• Doors and windows that don’t close properly.

On the property

• Previously buried items such as foundations and fence posts becoming exposed as the ground around them sinks.
• Formation of small ponds from rainfall accumulating in new areas.
• Slumping or falling trees or fence posts.
• A circular pattern of cracks in the ground, around a sinking area.
• Gullies and areas of bare soil, as earth moves into the sinkhole.

Where do sinkholes occur?

While areas across the U.S. are susceptible to natural sinkholes, the United States Geological Survey reports that the most damage from sinkholes occurs in the following states:

• Alabama
• Florida
• Kentucky
• Missouri
• Pennsylvania
• Tennessee
• Texas

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