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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
ivan terr
March 18, 2013 at 2:28 pm

Thanks for your tips, I found a great homeinsurance quote at: hxxp://usainsurancequotes.net

Carlos Lopez
March 18, 2013 at 10:36 am

I recently made an insurance claim for a sinkhole and upon settling with the insurance company, I was dropped. In trying to get new insurance, I paid for underpinning and obtained an engineers report showing the house was stabilized and repaired. Even with that, if you don't caulk/dump concrete under your property, Citizen's Insurance will not pick you in Florida. Where is the justice in having insurance, paying high premiums and then getting dumped upon your first claim? Its a nightmare trying to find someone to insure you. Its even worst knowing that your home is uninsured. I think I was better off living with my cracked floors and walls than making a claim.

John W
March 11, 2013 at 10:34 pm

There is another side to the story of sink hole claims, particularly in Florida. The number of sink hole insurance claims increased significantly when the bottom fell out of the housing market and many Floridians held mortgages in excess of the new market value of the home. When their variable rate mortgages were about to reset at a much higher rate, the owners found they were unable to remortgage the entire amount they owed because the banks devalued their homes. Solution - file a sink hole claim and let the insurance company pay off the mortgage. It is more than just a coincidence that sink hole claims in Florida skyrocketed as home prices plumeted.

john s
March 11, 2013 at 9:34 pm

You know we bend over backwards for companies. If they they don't want to do something we don't make them. If they aren't making enough money we give them subsidies. W ehave allowed them to ship jobs overseas. Meanwhile workers continue to lose benefits or get minimal raises. Walmart made 60 BILLION dollars last year yet 60% of their workforce live AT OR BELOW the poverty level. Oil companies have been posting RECORD profits in the last few years yet we are all suffering from the excessive price of gas. When are we going to stand up and tell them NO MORE. They need to start doing the right thing.

In Florida and other flood/ hurricane areas they did not want to cover water damage. Then they said that they did not want to cover roof replacement (many florida homeowners pay sepretly for their homeowners insurance AND roof insurance)

Now they don't want to cover sinkholes?

The main issue here is our elected leaders will continue to represent big companies who make big contributions untill we force them to get corprate money out of politics.

Joyce Macon
March 11, 2013 at 5:02 pm

If Insurance companies do not want to insure homeowners who's homes were built over developed land for home building and not disclosed to the buyer. Then the issuing state who gave land developers permission to develop these homes should compensate the homeowner and relocate them to comparable homes. Homebuyers should also do research on the developmentment of homes in that particular area before they buy. Equal responsibility...Everybody has a part, Insurance companies do have access to that information.

GJB
March 11, 2013 at 4:28 pm

Insurance companies are in the risk taking business and therefore should be required to give a reasonable quote for the incident and suck it up when there is a claim. If certain areas are prone to sink holes or a development is suspect, then it should be up to the insurance company to decide what the coverage should be. They say it costs them all this money for claims, well in the other side of the coin, how much did they keep??

Thomas Gray
March 11, 2013 at 3:26 pm

The American dream is now a nightmare. I have worked hard all my life in construction but, at this point I would never buy a house. I would sooner live on a boat or in a camper than hook up with ever growing expenses that later take away all I worked for. God forgive if you ever get sick now. I have health insurance that robs me of any extra money any time I go to the doctor and need something. I will just have to die sooner than later. If I get sick I prefer sooner these days.

We are only tolerated as grease for gears of large companies today.

Judith
March 11, 2013 at 1:50 pm

In Pennsylvania we have Mine Subsidence Insurance through a separate policy issued by the state. It is not required, but it is fairly inexpensive, so smart people have it. You can determine if your property is undermined, but if a mine isn't shown, I would still have it because some of the old maps are inaccurate.

Teri
March 11, 2013 at 11:31 am

I live in TN where sinkholes are also a problem as well as earthquakes. We do have earthquake and sinkhole insurance available, but both are add-on riders at an additional premium. To add both would raise my insurance from $800/year to $1200/year. And, the deductibles are 10% of the home's value, not 10% of the damage or your regular deductible. So, on my house, I would need more than $20,000 in damage to even file a claim. Of course with any type of foundation damage, you can get to that amount pretty quickly.

Jean Weigand
March 11, 2013 at 11:29 am

Sinkhole coverage...I never thought much about that until I received my renewal Homeowners policy. The insurance company attached a $20,000. deductible on Sinkhole claims! You would think, in view of this large deductible, the premium would be less. It was NOT! It was MORE! What happened to Florida's Insurance Commission? Does it even exist anymore? It probably should be called "Insurance Companies' Commission."