Sinkhole’s Are they Covered?

Sinkhole in Winter Park, 1981

Does my homeowners policy cover sinkholes? Is a question we get a lot. In the state of Florida there are two relevant coverages for sinkholes. One is called sinkhole coverage and the other is castrophic ground cover collapse coverage. But what is the difference?

One big difference is homeowners insurance always covers catastrophic ground cover collapse (this is required by Florida statute) but only covers “sinkhole” if it’s added by endorsement.

Lets take a quick look at the difference between the two coverage and how that impacts homeowners insurance policies in places like Winter Haven or Lakeland.

Florida has more sinkholes than any other state in the nation. Florida law requires authorized home insurance companies to cover “catastrophic ground cover collapse,” but damage caused by a sinkhole may not be covered by your policy.

So, what’s the difference?

Florida law defines a sinkhole as “a land form 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 (the dissolving) of limestone or dolostone or by the subsidence as these strata are dissolved.”

We tend to think of sinkholes as a big hole opening up and swallowing homes and buildings. This definitely happens. But the vast majority of sinkholes (as defined by Florida law) don’t involve a huge hole. Instead they cause an area of land to become unstable and slowly settle down as the soil slowly fills the cavity above. Creating a depression that might take eons to notice. This is how many of the lakes on the Winter Haven Chain of Lakes were formed.

“Catastrophic ground cover collapse” is defined as “geological activity that results in ALL of the following: 1). The abrupt collapse of the ground cover; 2). A depression in the ground cover clearly visible to the naked eye; 3). Structural damage to the building including the foundation; and 4). The insured structure being condemned and ordered to be vacated by the government agency authorized by law to issue such an order for that structure.”

Catastrophic ground cover collapse actually describes what we tend to think of as a sinkhole. So catastrophic ground cover collapse is always a Sinkhole but a sinkhole isn’t always catastrophic ground cover collapse. The important thing to note here is that ALL of the 4 things listed above have to apply to be covered by a home insurance policy under “catastrophic ground cover collapse” coverage. Whereas for sinkhole coverage I tend to think of it as heavy settling coverage. This occurs when the ground underneath the home “settle’s” in such a way that the slab foundation develops serious cracks that impact the home but do not make it uninhabitable.

Both of these coverage’s used to be a part of a single endorsement but the sinkhole (or heavy settling) portion of the endorsement was the subject of so much fraud that they separated them.

So how does a home insurance policy cover you in both scenarios.

Catastrophic ground cover collapse: if the sinkhole that forms on your property does meet all the above 4 criteria then your home insurance policy will cover the damages (assuming your insurance company is an admitted carrier).

Important things to note on Catastrophic ground cover collapse:
1. Most sinkholes that form under a home, forms a hole, and damages the home should qualify for catastrophic ground cover collapse.
2. The “All Other Perils” deductible (aka AOP or other than hurricane deductible) should apply. This deductible is normally the smallest deductible on a home owners policy.

Sinkhole: if the sinkhole forming on your property does not meet all four of the criteria to be considered Catastrophic ground cover collapse then it would be covered under the portion of your policy titled “sinkhole coverage”. Your policy may or may not have this coverage, so this is important to know.

Important things to note on Sinkhole coverage:
1. Your policy will only included it if it has been added by endorsement. Otherwise it is excluded.
2. Why would it be excluded? Most home insurance companies require a sinkhole inspection to be submitted before allowing the coverage to be added. These inspections range from $3,000 to $8,000 and so may be out of most consumers budget range.
3. Most sinkhole endorsements carry a 10% sinkhole deductible. This 10% is 10% of the dwelling amount of the home. So, a $200,000 home would carry a $20,000 sinkhole deductible.

If you have any questions about catastrophic ground cover collapse or sinkhole coverage give me a call or email to discuss.