What is sinkhole insurance?

What is a sinkhole?

According to the U.S. Geological Society, a sinkhole is formed when bedrock, usually made up of limestone, salt beds or another similar substrate, is dissolved by acidic groundwater. An underground void develops when this happens, and when it becomes unstable, a collapse occurs.

Sinkholes have several causes. In some situations, they’re triggered by land overdevelopment. In other cases, sinkholes form after a sudden influx of rain following a period of drought. Sometimes, ground erosion is small and rather unnoticeable; other times, it can destroy entire homes and roadways.

What is sinkhole insurance?

A standard HO-3 policy, the most common type of home insurance, pays for the repairs to the physical structure of your dwelling, other structures and personal property from covered perils. However, it usually doesn’t cover the land it sits on — and it rarely covers foundation repairs. 

Sinkhole insurance is a special insurance policy that covers your home, other structures and personal belongings from sinkhole damage. Sinkhole insurance may also pay to stabilize your home’s land and help cover the cost of repairing your foundation. 

When a sinkhole event occurs, it is typically categorized under the exclusion section of a home policy as "earth movement." Earth movement includes but is not limited to earthquakes, landslides, mudflows, sinkholes, subsidence and erosion of earth. Most homeowners insurance policies do not include sinkhole coverage, but some states require sinkhole endorsements to be available in areas prone to this type of loss.

How does sinkhole insurance work?

When you apply for coverage, the insurance company may inspect your property for any structural damage before issuing your sinkhole insurance policy. The land on your property may also be geologically tested to detect potential sinkholes.

In the event of a sinkhole, a claims adjuster may visit your home with other experts, like a geologist or engineer, to survey and investigate the damage before determining the cause of the claim and the cost of repair.

There are two main types of sinkhole insurance — sinkhole loss coverage and catastrophic ground cover collapse coverage. Here are the differences in coverage:

• Sinkhole loss coverage: Sinkhole loss coverage is an insurance endorsement that typically covers man-made sinkholes, including those related to mining operations. It may or may not cover naturally occurring sinkholes.
• Catastrophic ground cover collapse coverage: Catastrophic ground collapse coverage protects your home if it falls into a sinkhole, and the foundation is damaged beyond repair. This type of coverage is only available in Florida, and it is required coverage. To qualify for catastrophic ground collapse coverage, your home must be condemned by a local government agency.

Who needs sinkhole insurance?

Sinkholes are most common in areas where the rocks beneath the ground surface are soft and porous, like limestone and gypsum, which can be dissolved by groundwater and create caverns beneath the land surface. According to the U.S. Geological Survey, about 25 percent of U.S. land is susceptible to sinkholes. The following states are particularly at-risk:

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

However, sinkhole insurance is not as accessible as regular home insurance. Not every insurance company offers it. Out of the list above, Florida and Tennessee are the only states that require insurance providers to offer an optional sinkhole insurance policy. If you live in one of these states, you may be able to purchase sinkhole insurance as a home insurance endorsement or as an individual policy.

If you don’t live in Florida or Tennessee but you’re interested in this type of coverage, you’ll need to specifically look for an insurer that offers sinkhole insurance — and it may prove difficult. 

Keep in mind that some sinkhole insurance policies do not cover man-made sinkholes, which are more common in places like Pennsylvania. Homeowners who struggle to get sinkhole insurance can contact their state’s Department of Insurance to find out what coverage options and policies are available to them.

Is sinkhole insurance worth it?

If you own a home in a high-risk sinkhole area, sinkhole insurance could be something to consider. Without sinkhole insurance, you would have to pay out of pocket to repair or rebuild your home. Remember that most homeowners insurance companies do not cover sinkhole claims.

Although researchers believe a catastrophic sinkhole has a one in 100 chance of occurring in any year, you may still be affected by smaller sinkholes in your area. To decide if your home needs this type of insurance, some factors to think about are:  

• Your location
• History of sinkholes in the areas surrounding you
• Irregular weather patterns like heavy rain or flooding
• Man-made events near you that could accelerate the creation of a sinkhole, such as digging or drilling

Still unsure whether or not to buy supplementary sinkhole insurance? Consider consulting insurance professionals in your area to see if it’s recommended for your property.

If you decide to purchase sinkhole insurance, you will likely have to pay a sinkhole deductible if you file a claim. The deductible is usually a percentage of the policy’s dwelling limit. For instance, in Florida, homeowners can choose a 1, 2, 5 or 10 percent deductible for their sinkhole insurance.

Frequently asked questions