As a homeowner, the right homeowners insurance policy is a crucial tool for protecting yourself financially against covered perils. But while a homeowners insurance policy will typically cover you against a number of natural disasters, including fires and hurricanes, there may be some that are not covered by your policy. Take, for example, sinkholes, which are typically excluded from your coverage.

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Sinkholes are typically formed when the ground below the surface is saturated with groundwater, causing it to collapse inward. In turn, a sinkhole can cause serious structural damage to a home and may even cause an abrupt collapse of the home if the sinkhole grows large enough. It can be difficult to determine whether there’s a sinkhole on your property, but if you live in a state that’s at high risk for sinkholes, or if you think your house could be at risk, sinkhole insurance may be an option to consider.

What is sinkhole insurance?

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

Many homeowners assume that their home insurance policy will cover sinkhole damage, but that is generally not the case. Standard homeowners insurance policies usually do not include sinkhole coverage.

Home insurance covers the physical structure of your house, but not the land it sits on. Other structures, like a detached garage, are also typically insured structures. Sinkholes are technically a form of earth movement, which is not a covered peril under most home insurance policies. Sinkholes are generally treated like earthquakes in terms of insurance coverage.

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.

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 making any determinations on the cause of the claim and cost of repair.

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 for sinkholes:

  • Alabama
  • Florida
  • Kentucky
  • Missouri
  • Pennsylvania
  • 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.

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 occuring 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, the history of sinkholes in the areas surrounding you, as well as any irregular weather patterns like heavy rain or flooding, or man-made events near you that could accelerate the creation of a sinkhole.

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

    • It depends. In most cases, a standard homeowners insurance policy does not cover sinkholes. That’s because, like earthquakes, sinkholes are considered to be a form of earth movement, which is not a typical covered peril. If you are at high risk of sinkholes in your area, it may be worth considering a sinkhole insurance policy or endorsement, as you’ll need to have sinkhole insurance in order to get reimbursed after a covered loss.
    • The cost of homeowners insurance coverage varies based on numerous factors. That said, it’s important to note that the coverage is typically a separate cost on top of your regular home insurance premium. Additionally, you will have to pay a deductible out of your own pocket each time you file a sinkhole claim, which can add to the total cost of sinkhole coverage.
    • Unlike home or auto insurance, sinkhole insurance is not a common coverage type in all states. In low-risk sinkhole states, you might not be able to find coverage anywhere. Florida and Tennessee are the only states that require all insurance companies to offer sinkhole coverage, and the catastrophic level for a condemned and uninhabitable home is automatic in Florida. If you are looking for sinkhole insurance, your best option is to find a local insurance company in your area that offers it.
    • While sinkholes often seem to appear without warning, their development happens slowly over time. When inside your home, look for changes in the structure. This could be doors and windows that don’t close properly, cracks in the walls and floors and cabinets that become uneven or slanted. Outside of your home, check for sagging in fences, foundations and trees, as well as ponds of water where rainfall hasn’t pooled together before or uneven depressions in the yard and street. If anything seems particularly alarming, you can reach out to a contractor specializing in foundation repair for a second opinion.