Did you know home insurance always covers one, but may not cover the other?
Knowledge is power! This post is meant to be a short snapshot of the difference between sinkhole and catastrophic ground collapse (from the viewpoint of the insurance company) and how home insurance plays a role.
Florida has more sinkholes than any other state in the nation. Florida law requires authorized home insurance companies to cover “catastrophic ground cover collapse,” but damage caused by a sinkhole may not be covered by your policy.
So, what’s the difference?
Florida law defines a sinkhole as “a land form created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater. A sinkhole may form by collapse into subterranean voids created by dissolution (the dissolving) of limestone or dolostone or by the subsidence as these strata are dissolved.”
I believe the important thing to take away here is that a sinkhole is not always a giant hole opening in the ground. In fact, quite often the underground collapsing doesn’t cause a hole and instead causes an inward sloping of an area of land (which is how some of Florida’s lakes and ponds are naturally formed).
“Catastrophic ground cover collapse” is defined as “geological activity that results in ALL of the following: 1). The abrupt collapse of the ground cover; 2). A depression in the ground cover clearly visible to the naked eye; 3). Structural damage to the building including the foundation; and 4). The insured structure being condemned and ordered to be vacated by the government agency authorized by law to issue such an order for that structure.”
I believe the important things to note here is that ALL of the 4 things listed above have to apply to be covered by a home insurance policy under “catastrophic ground cover collapse” coverage.
So how does a home insurance policy cover you in both scenarios.
Catastrophic ground cover collapse: if the sinkhole that forms on your property does meet all the above 4 criteria then your home insurance policy will cover the damages (presuming your insurance company is an admitted carrier).
Important things to note on Catastrophic ground cover collapse:
1. Most sinkholes that form under a home, forms a hole, and damages the home should qualify for catastrophic ground cover collapse.
2. The “All Other Perils” deductible (aka AOP or other than hurricane deductible) should apply. This deductible is normally the smallest deductible on a home owners policy.
Sinkhole: if the sinkhole forming on your property does not meet all four of the criteria to be considered Catastrophic ground cover collapse then it would be covered under the portion of your policy titled “sinkhole coverage”. Your policy may or may not have this coverage, so this is important to know.
Important things to note on Sinkhole coverage:
1. Your policy may or may not include it. It can be included or excluded from a policy.
2. Why would it be excluded? Some home insurance companies require a sinkhole inspection to be submitted before allowing the coverage to be added. These inspections range from $3,000 to $8,000 and so may be out of most consumers budget range.
3. Many home insurance policies that do cover sinkhole carry a 10% sinkhole deductible. This 10% is 10% of the dwelling amount of the home. So, a $200,000 home would carry a $20,000 sinkhole deductible.
If you aren’t sure if your current policy covers sinkhole a quick call to your agent should clear it up. Below is a helpful link if you’re interested. We hope this post brought you some value and thank you for reading! http://www.wellcoveredinsurance.com/contact.html
About the Author:
Richard Dixon is the owner operator of Wellcovered Insurance a local independent insurance agency located in Orange City, Florida.