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Aug 15

Why can’t I get “sinkhole” coverage?

SinkholeWith more and more images and videos of sinkholes in the central Florida and Tampa Bay area, homeowners are very concerned about the possibility of a sinkhole damaging their home and having coverage for it.  Unfortunately, for those who might not yet be aware, “sinkhole” coverage has become nearly impossible to obtain in certain areas.  However, that does not necessarily mean you won’t have coverage if your home is swallowed by a sinkhole.  First, let me explain why “sinkhole” coverage has become so elusive…

A few years ago, “sinkhole” coverage was relatively standard on most Florida policies.  Over the past several years, however, there has been a significant increase in sinkhole claims…many of these turned out to be nothing more than normal settling of the house.  Although it may seem like a minor issue to have a bunch of claims that turn into nothing, sinkhole claims are a bit unique because the insurance companies must go through an extensive process, gathering a large amount of information through soil and engineering reports that can cost thousands of dollars for each claim.  So, when the insurance companies began experiencing a large influx of sinkhole claims that weren’t anticipated (even though many were not sinkholes), their losses/expenses rose dramatically.  To recover these costs, rates began rising quickly, and a solution was devised that yielded two separate coverages: “sinkhole” and “catastrophic ground collapse”

Catastrophic ground collapse coverage is a standard coverage now provided on most policies, and it is a much more narrowly defined coverage designed to provide coverage for major (catastrophic) damage to the primary structure to a point at which the home is considered dangerous to occupy.  This is what most policies provide now, depending on where your home is located.

As mentioned above, the more loosely-defined “sinkhole” coverage has become difficult (if not impossible) to obtain in certain areas (including the greater Tampa Bay area).  Very few companies provide this coverage, and for those who are still able to keep or obtain “sinkhole” coverage, most companies in sinkhole-prone areas have assigned a separate deductible (generally 10% of the Dwelling coverage limit), which puts much of the initial responsibility on the homeowner.

As the phrase goes, “the only constant is change,” and it is important to have an agent looking after your best interests and helping you navigate through the ever-changing insurance landscape.  If you have questions about your coverage options, we’d love the opportunity to help…

Recent news article/video on a sinkhole that opened up near the Disney World area in Clermont, Florida