How Sinkhole Insurance Claims Work

A standard homeowners insurance policy does not cover sinkhole damage. Most policies exclude damage caused by earth movements – including sinkhole damage.

Fortunately, there are ways to get sinkhole insurance coverage – or even reverse a denied sinkhole insurance claim.

How Sinkholes Work

Homeowners in certain parts of the United States may be affected by sinkholes.

When part of the ground disappears, it creates a sinkhole. Sinkholes can cause significant damage to property – and even lead to loss of human life.

Over time, water destroys the ground in an area, causing cracks in the underlying bedrock. Even if the bedrock was previously solid, these cracks affect the integrity of the bedrock, ultimately leading to a collapse.

As cracks get larger, water pools beneath the surface, further weakening the bedrock and underlying structure of the ground. When ignored over time, the ground collapses on itself to create a sinkhole.

Where Sinkholes Occur

Sinkholes can occur virtually anywhere in the world. However, they’re particularly common in certain states.

According to the United States Geological Survey, homeowners in the following states have the highest risk of sinkholes:

• Alabama
• Florida
• Kentucky
• Missouri
• Pennsylvania
• Tennessee
• Texas

Sinkholes are most common in low-lying areas close to the water, including parts of Alabama, Florida, and Texas.

However, sinkholes can also occur in areas with unique geological features – like parts of Kentucky, Pennsylvania, and Tennessee where porous limestone forms a bedrock. Whether you’re close to the ocean or hundreds of miles from it, you could be at risk of a sinkhole.

Why Sinkholes Occur

Sinkholes occur for a variety of reasons.

As the USGS explains, most sinkholes occur when bedrock is naturally dissolved by groundwater, impacting the structural integrity of the bedrock and causing the ground to collapse on itself.

Sometimes, sinkholes occur naturally. In other cases, they’re caused by human activity – like agricultural or mining activity.

In the Dover area of Florida, for example, more than 110 sinkholes formed during a freeze event in January 2010. Temperatures plummeted, and farmers pumped water to protect plants from cold temperatures. The resulting sinkholes caused millions of dollars’ worth of damage to homes, roads, and crops in the area.

Some of the reasons sinkholes occur include:

• Agricultural activity
• Mining activity
• Natural reasons (like heavy rain or flooding)
• Decline of water levels in an area (say, because of quarries, mines, wells, or groundwater pumping)
• Concentration of water flow
• Heavy loads on the surface

In most cases, several factors combine to create a sinkhole – like the softness of bedrock in an area and the flow or buildup of water.

How Sinkhole Insurance Works

A standard homeowners insurance policy excludes sinkhole coverage. In fact, your policy likely excludes damage related to any type of earth movement, including mudslides, earthquakes, and sinkholes.

If you live in a sinkhole-prone area, however, or if you want extra peace of mind, then you could pay extra to add sinkhole coverage to your policy. Many insurers offer sinkhole coverage as an endorsement or rider:

• A standard homeowners insurance policy doesn’t cover sinkholes or other earth movements (like mudslides, earthquakes, or sinkholes).
• However, you may be able to buy sinkhole coverage as an endorsement or rider, paying a few extra dollars per month to add sinkhole coverage to your policy.
• Once added to your policy, sinkhole coverage should cover the cost of repairing or replacing damaged property after a sinkhole.
• A typical sinkhole policy could cover repairing your home’s foundation, for example, stabilizing the land around the sinkhole, and replacing any of your possessions (excluding a vehicle) that may have been damaged by the sinkhole.
• Some sinkhole endorsements only cover manmade sinkhole damage – like sinkholes caused by mining operations – while excluding sinkholes caused by natural events.

Your insurer may or may not offer sinkhole coverage. Some states, including Florida and Tennessee, require insurers to offer sinkhole coverage. Some insurers, meanwhile, require you to complete a geological survey before adding a sinkhole endorsement.

Sinkhole Coverage Isn’t the Same as Catastrophic Ground Cover Collapse

Confusingly, sinkhole coverage is different from catastrophic ground cover collapse.

Per state law, insurers in Florida must offer catastrophic ground cover collapse coverage. A standard homeowners insurance policy in Florida includes this coverage.

However, this type of insurance does not cover sinkholes; instead, it only covers situations that meet all of the following requirements:

1. Requirement #1: The ground cover collapsed abruptly.
2. Requirement #2: The depression in the ground cover is clearly visible to the naked eye.
3. Requirement #3: There’s foundation damage to a principal building covered under the policy.
4. Requirement #4: The principal building has been condemned as a result of the ground cover damage.

If your ground movement claim meets all of the above requirements, then you may be able to make a homeowners insurance claim.

Some sinkhole claims do meet all four of these requirements, which means your insurance policy could cover some sinkhole claims.

How Much Does It Cost to Add Sinkhole Coverage?

Sinkhole coverage could cost anywhere from a few extra dollars per month to a few hundred extra dollars per year, depending on your location and other risk factors.

You should also factor in the cost of your sinkhole coverage deductible. Some insurers use an All Other Perils deductible for sinkhole claims. Instead of paying an ordinary $1,500 deductible for your homeowners insurance claim, for example, you could pay 1% to 10% of your home insurance limit – similar to how some hurricane claims work.

Talk to your insurer to ask about adding sinkhole coverage to your policy.

Should You Buy Sinkhole Insurance?

Depending on your location, sinkhole insurance may or may not be worth it.

Like all insurance debates, it’s up to you to decide whether or not sinkhole insurance is worth it based on:

• Your personal aversion to risk
• Local risk factors
• Peace of mind
• How much you’re willing to spend on insurance each month

Sinkholes are rare in most parts of the United States. Even in higher-risk areas, experts estimate there’s a less than 1% chance of a catastrophic sinkhole occurring each year. However, local risk factors, the size of your property, and your aversion to risk can all impact whether or not sinkhole insurance is worth it.

Dealing with a complicated sinkhole insurance claim? ClaimsMate’s public adjusters can help.

Contact ClaimsMate today for a no-cost consultation with an insurance claim specialist in your area.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.