Sinkhole Activity vs. Catastrophic Ground Collapse: Home Insurance in Florida

2013-03-19-sinkhole2.jpgAs has been widely reported, a man died in Florida recently when a sinkhole opened up underneath his home. While this is an unusual occurrence, more and more dangerous sinkholes are appearing. While they seem to be occurring most frequently in the Florida area, it's estimated that 35-40 percent of the United States is at potential risk of sinkholes, according to the U.S. Geological Survey, so it's something which homeowners all over the country may need to consider in the near future.

The sinkhole which tore down Jeff Bush's home was a rare and extreme example of a sinkhole, but anyone living in Florida should beware; the entire state is prone to sinkholes. Sinkholes form when rainwater dissolves limestone and other types of rock underground. Florida's bedrock consists mainly of limestone, which is why sinkholes are such a risk to the state.

As the limestone is eaten away it creates a gap, pulling down the ground surface. It can cause cracks in roads and pavements, and can open right up and swallow cars, properties and people. Missouri, Kentucky, Texas and Tennessee are known to be particularly prone to sinkholes.

Images courtesy of dno1967b and Foxtongue.

So how can we protect ourselves and our homes from sinkholes? In Tennessee and Florida home insurers are required to offer sinkhole coverage with home insurance policies. While home insurance policies can be easily amended to include damage from sinkholes, many homeowners in the area opted out of sinkhole cover because the insurance premiums rose fast in 2011.

In other states homeowners are less likely to be aware of sinkhole risks, and will be much less likely to ask for its inclusion in their home insurance policy. Even if they do, it is unlikely to be included in a home insurance policy, and will require a separate additional policy. Many homeowners expect to be protected in these kinds of circumstances but find out all too late that they're not.

As Florida experiences more sinkhole activity than any other state in the country, they have a statute that requires all insurers in Florida to offer coverage for "ground cover collapse", but sinkholes can be distinct from ground cover collapse, as Floridian law defines sinkholes as "landforms create by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater", whereas catastrophic ground cover collapse is defined as geological activity which collapses the ground cover, depresses the ground cover to the point that it is clearly visible to the naked eye, causes structural damage to the property or foundations and results in the property being condemned and vacated.

What this means is that if a home is damaged by a sinkhole and the owner doesn't have sinkhole-specific insurance, the insurance claim must meet all four criteria in order to be classified as "catastrophic ground cover collapse."

Sinkhole activity also raises legitimate concerns for home buyers. Buyers considering purchasing a property in a sinkhole-prone area then ensure that the structure is insurable, that sinkhole coverage is included in the existing insurance policy or that it can be added upon buying. You should also consider hiring experts to survey the property for sinkhole risk.