Does Homeowners Insurance Cover Sinkholes: Everything You Need to Know
A sinkhole is a hole in the ground caused by a collapse of the surface layer. Though they develop over a period of years, the collapse itself can occur in an instant, swallowing up anything that happens to be on the surface level when it happens. This is why sinkholes are notorious for being able to “devour” a house in the blink of an eye.
Fortunately, sinkholes are relatively rare, though they are known to occur more frequently in certain areas. A well-prepared homeowner should ask him or herself two questions: is my property at risk, and does my homeowners insurance cover sinkholes?
What is a sinkhole and where do they form?
A sinkhole, also known as a cenote, swallet, or doline, is a depression in the ground with no natural external surface drainage. This means that when it rains, the water stays inside the sinkhole and drains into the subsurface, according to the U.S. Geological Survey.
Sinkholes are most commonly formed in “karst terrain,” what geologists call regions in which the circulating groundwater can naturally dissolve the types of rock below the land surface.
Such soluble rocks include evaporitic rocks like gypsum and anhydrite or carbonate rocks like dolomite and limestone.
The latter is frequently found in Florida, a state known for its susceptibility to sinkholes. These types of rocks dissolve over time when water from rainfall seeps down into them through the soil, creating underground spaces and caverns.
The land usually stays intact for a long time before those underground spaces become too large and the ground suddenly collapses, forming the sinkhole.
States known to contain land with sinkhole potential include Texas, Alabama, Missouri, Kentucky, Tennessee, Pennsylvania, and practically all of Florida. In total, the USGS estimates that 20% of Americans live in sinkhole-prone areas, meaning quite a few houses could be at risk.
Not even the People’s House is safe from the menace. In 2018, it was reported that a small sinkhole had opened up on the White House lawn in Washington D.C., a city famously built on a swamp, and therefore susceptible to sinkholes.
Does Homeowners Insurance Cover Sinkholes?
Though two in ten Americans live in areas prone to sinkholes, the actuarial risk of a catastrophic sinkhole happening is quite low, according to researchers, who estimate it to have a one-in-100 chance of occurring in any given year.
Unfortunately, it is difficult to know whether there is or isn’t a sinkhole on your property. According to the U.S. Geological Survey, there is no efficient method for making that determination, and the agency instead advises homeowners to keep their eyes open for small clues, such as little holes in the ground or cracks forming in a structures foundation.
Checking with your county property appraiser or inquiring about the availability of a statewide sinkhole database could also prove helpful.
Sinkholes can range from a few feet in diameter to hundreds of acres in size and are similarly capable of causing small or severe amounts of damage to a home. In its most dramatic form, a massive sinkhole could suddenly open up and consume an entire property whole.
In a best-case scenario, a small sinkhole could open up in a yard but not affect any of the structures or personal items on that property. If you live in an area where you feel you need to obtain homeowners insurance to protect yourself from sinkhole-related minor structural damage, destruction, or anything in between, you will want to learn more about your level of coverage.
When it comes to insurance coverage, sinkholes present a unique challenge. Homeowners insurance policies tend to be priced based on an assessment of what it would cost to rebuild the home’s structure, with no consideration given to the price of the land that the home is sitting on.
That means the real estate value of your land is not factored into your home insurance policy, which solely covers the value of the house itself.
As a result, most property insurance policies in the U.S. exclude damage related to the movement of the earth. Property owners who live in areas with a high risk of earthquakes, which are the most common type of catastrophic earth movement, are required to purchase that insurance separately.
While there are some obvious similarities between the two, sinkholes are unfortunately much harder to predict than earthquakes, and also more difficult to investigate. And they can be just as if not more devastating for a homeowner, and incredibly expensive to recover from.
In the same way that home insurance companies in California offer optional earthquake coverage, there are a handful of sinkhole-prone states that require insurers to offer optional sinkhole coverage for an additional premium.
This special sinkhole coverage may be offered either as an endorsement to a property insurance policy or as a stand-alone policy, depending on the mandates established by state insurance regulators.
Insurers in Florida and Tennessee are required to offer optional sinkhole coverage, which provides homeowners with comprehensive protection against sinkhole damage, according to the Insurance Information Institute.
Florida insurers, in particular, are also required to include as part of the standard homeowners policy insurance for “catastrophic ground cover collapse.” This coverage includes damage severe enough to make a home uninhabitable and is defined according to four criteria:
- abrupt collapse of the ground cover
- a resulting depression in the ground cover
- structural damage (including the foundation)
- the insured structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order
Sinkhole coverage used to be included in all basic homeowner’s insurance policies in Florida, but a 2011 law allowed insurers to opt out in order to reduce coverage costs.
Every day, an average of 17 Floridians file claims for sinkhole damage, according to Business Insider, with the average sinkhole insurance claim in the Sunshine State coming in at more than $140,000. The average yearly cost for coverage ranges from $2,000 to $4,000.
Should you purchase sinkhole coverage?
Sinkholes are relatively rare in general, and extremely difficult to predict, though much more common in areas with soluble rocks like limestone beneath the surface.
States known to contain such conditions include Texas, Alabama, Missouri, Kentucky, Pennsylvania, Tennessee, and Florida. In the latter two states, insurers are required to offer comprehensive sinkhole protection in the portion of their homeowners policies that cover water damage, though it is still not standard.
For the most part, sinkhole damage will not be a standard coverage in any homeowner’s insurance policy, as policies are generally designed to cover structures and contents, and not what happens below the ground upon which they are built.
If you live in a high-risk area for sinkholes, you will have to be proactive about talking to your insurance provider to find out if additional coverage for earth movement is available to you.