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Home insurance vs. sinkholes

By Jay MacDonald · Bankrate.com
Friday, March 8, 2013
Posted: 6 am ET

I live about 30 minutes from Seffner, Fla., the small town where a sinkhole recently opened up in the middle of the night and swallowed 37-year-old Jeff Bush along with most of the contents of his bedroom.

While the tragedy unfolded on TV to the abject horror of anyone with a heart, it held additional significance for Florida homeowners who have anxiously watched their homeowners insurance rates climb in recent years, in large part to cover just such a nightmare.

A recent state survey of 211 home insurers operating in Florida found that sinkhole claims nearly tripled between 2006 and 2010, from 2,360 to 6,694. The combined five-year total of 24,671 claims cost insurers about $1.4 billion.

What's with all the sudden sinkhole claims? Unchecked development onto questionable land, weak building regulation, the annual drawdown of localized water tables for agricultural purposes, and the inherent unpredictability of ground collapse are generally cited as contributing factors.

That said, those of us who reside in one of Florida's 10 most sinkhole-prone counties, the bulk of which are located in the greater Tampa Bay area, worry less about losing our homes than losing our home insurance, and with good reason. While it's highly unlikely that a sinkhole will swallow my house, the odds that the cost of sinkhole coverage will swallow my income are growing daily.

What the TV coverage of the Jeff Bush tragedy didn't show is the muddle we've made of sinkhole coverage here in Florida.

Under state law, every insurer authorized to sell homeowners insurance in Florida must provide coverage for "catastrophic ground cover collapse," which basically means that any sighted person strolling by your house would pause and observe, "That place don't look right."

Unfortunately, state lawmakers then went on to define a sinkhole with such specificity that it miraculously turned into a loophole large enough for any home insurer with a sentient legal team to fit through with ease.

In 2011, under pressure from the insurance lobby that fraudulent sinkhole claims were the real culprit, the state legislature passed a law that states that if an insurer denies your sinkhole claim, it will now cost you, the homeowner, up to $2,500 to obtain scientific proof that your sunken living room was not designed that way.

To shift even more risk back onto homeowners, Citizens Property Insurance Corp., the state's largest carrier and home insurer of last resort, notified its 1.4 million customers last year that it was adding a 10 percent sinkhole deductible on top of a 10.8 percent rate increase.

Insurers have made it crystal clear they want out of the sinkhole coverage requirement. The question on Florida's collective kitchen table is: If property and casualty insurance companies can't or don't care to share the sinkhole risk, what's a homeowner to do?

Any suggestions would be greatly appreciated. And by all means, please copy Tallahassee.

Follow me on Twitter: @omnisaurus

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28 Comments
Ginger
September 26, 2013 at 5:26 pm

Allied Insurance provides sinkhole coverage in TN, and I am pretty sure they are licensed in FL. I would contact an Allied agent in your area. They are a Nationwide company, so it's possible Nationwide offers it also.

TN and FL are the two biggest states for sinkholes!

Faith
September 26, 2013 at 12:43 pm

I received in my Wells Fargo newsletter an important message from Ace American Insurance Co. that does offer coverage for earth movement (sinkholes) The insurance policy does not cover for damages. http://www.acegroup.com for more help. I'm looking into this for my home located in MD. Under coverage (B) it is to cover sink holes. The price I was quoted for the 12 month policy was $143.53. Pretty reasonable I thought.

Bill
September 26, 2013 at 12:20 pm

Life just aint fair. Like they told me when I lost my job here in Florida; just move someplace else !

Tracy
September 26, 2013 at 11:36 am

In the area I live in East Peoria, Illinois, we are required to have Mine Subsidiary Insurance on the insurance policy. When I bought my house, they told me it was specifically for this type of catastrophe due to coal mines that were in the area back in the day. After all I have seen in the news about sinkholes, I am worried sick that this will happen one day in my area.

Rich
September 26, 2013 at 9:33 am

Tell me where in the policy it staes that coverage is afforded to homes damaged because of sink holes...movement of land is not covered, unless you have earthquake coverage...policies issued in Fla may have a sink hole endorsement that I am not aware of, but here in the northeast its not available...

Ken
September 24, 2013 at 5:13 pm

Why must insurance include sinkhole coverage. We never wanted it, we just wanted our home insured for damage.

We had a settlement seven years ago, when our coverage was cancelled by Allstate. We had no choice in the matter. They simply said, your policy has been canceled, her is your payment for the policy. Now the house is uninsurable for anything. We also could not sell it because it's uninsurable. So what is a homeowner supposed to do? There never was a mortgage. My parents bought the house outright with their savings.