What is sinkhole insurance?

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Large sinkholes make the news every few years, but smaller sinkholes are more common than you think. A sinkhole forms when the ground below the land surface gets saturated with groundwater and eventually collapses inwards.

Currently, there is no way to determine if there is a sinkhole on your property. But if you live in a high-risk sinkhole state, your house could be at risk.

What is sinkhole insurance?

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

Many homeowners assume that their home insurance policy will cover sinkhole damage, but that is not always the case. Standard homeowners insurance policies usually do not include sinkhole coverage, although some open perils policies may include it.

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

There are two main types of sinkhole insurance—sinkhole loss coverage and catastrophic ground 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 collapse coverage: Catastrophic ground collapse coverage protects your home if it falls into a sinkhole, and the foundation is damaged beyond repair. To qualify for catastrophic ground collapse coverage, your home must be condemned by a local government agency.

How does sinkhole insurance work?

Unlike home insurance, you cannot purchase sinkhole insurance online or over the phone. When you apply for coverage, the insurance company will need to thoroughly inspect your property before issuing your sinkhole insurance policy. The land on your property will also be geologically tested to detect potential sinkholes.

If your home gets damaged by a sinkhole, your insurance policy will reimburse you for the cost of repairs. If a sinkhole destroys your home, you will receive money to rebuild your home. You will also receive money to replace your items, stabilize the land and repair the foundation.

When you file a sinkhole insurance claim, an adjuster from the insurance company will visit your home with a geological expert or engineer to survey the damage. They will determine if it is safe for you to repair or rebuild your home on your existing land.

Who needs sinkhole insurance?

Homeowners in high-risk sinkhole areas should consider purchasing this insurance type. Sinkholes cause the most damage in Florida, Texas, Alabama, Missouri, Kentucky, Tennessee and Pennsylvania. Sinkholes are often found in areas that experience heavy rainstorms and significant flooding.

However, sinkhole insurance is not as accessible as regular home insurance. Not every insurance company offers it. 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 can 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 common in places like Pennsylvania. Homeowners who struggle to get sinkhole insurance can contact their state’s department of insurance to find out what coverages and policies are available to them.

Is sinkhole insurance worth it?

If you own a home in a high-risk sinkhole area, sinkhole insurance is worth it for some people. 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.

On the other hand, homeowners who do not live in high-risk sinkhole areas probably do not need to purchase sinkhole coverage. Sinkhole insurance is very expensive, and sinkholes are very rare, even in high-risk areas. The high policy cost outweighs the peace of mind that comes with extra protection.

If you decide to purchase sinkhole insurance, you will likely have to pay a sinkhole deductible. 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% deductible for their sinkhole insurance.

Frequently asked questions

Does homeowners insurance cover sinkholes?

In most cases, homeowners insurance does not cover sinkholes. Your homeowners insurance policy only covers the physical structure of your house. Like earthquakes, sinkholes are a form of earth movement, which is usually not a covered peril. You need to have sinkhole insurance in order to get reimbursed after a covered loss.

How much does sinkhole insurance cost?

Sinkhole insurance is typically very expensive, and it is a separate cost on top of your regular home insurance premium. Additionally, you have to pay an out-of-pocket deductible each time you file a sinkhole claim. Because of that, many homeowners forgo sinkhole insurance to save money.

Which insurance companies offer sinkhole insurance?

Unlike home or auto insurance, sinkhole insurance is not a popular policy. 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. If you are looking for sinkhole insurance, your best option is to find a local insurance company in your area that offers it.