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Homeowners insurance coverage and sinkhole damage

Does Homeowners Insurance Cover Sinkholes?

Sinkholes are no longer uncommon in the US, which is why more and more homeowners are looking into their insurance policy to see if they are protected against damage caused by sinkholes. Standard homeowner’s insurance policies would often cover for sinkholes, but there are some homeowners that opt out of this coverage to limit their insurance payment. This is why we look deeper into the need for sinkhole insurance. Find out more about this topic in this article.

What are Sinkholes?

Sinkholes are fairly common. However, when you discuss sinkholes within the context of insurance, it becomes a more complicated topic. This is because sinkholes have a slightly different definition scientifically and legally.

USGS defines sinkholes as “…a depression in the ground that has no natural external surface drainage. Basically, this means that when it rains, all of the water stays inside the sinkhole and typically drains into the subsurface… When water from rainfall moves down through the soil, these types of rock begin to dissolve. This creates underground spaces and caverns.” Florida, the state that is most prone to sinkholes, legally defines sinkhole loss as “structural damage to the building, including the foundation, caused by sinkhole activity.”

Sinkhole Risk in the USA

While sinkholes can happen almost everywhere, there are some states that have a higher risk compared to others. There are 7 states that are more prone to sinkholes, which are Florida, Texas, Alabama, Kentucky, Missouri, Tennessee, and Pennsylvania.

Sinkhole and Earthquake Insurance

The insurance coverage for sinkhole is a bit tricky because it doesn’t just require the usual replacement or repair cost. This is because sinkhole claims will require the determination of the value of the land. Rebuilding a home in a location with the same real estate value will be tricky for both the insurance company and the insured. The cost of repair when it comes to sinkhole damage is also not minimal. This is why insurance policies for sinkhole coverage can be a stand-alone policy or an endorsement to a property insurance policy.

Catastrophic Ground Cover Collapse vs. Sinkhole Insurance

Apart from the sinkhole insurance, insurance companies may also need to provide an insurance policy for “catastrophic ground cover collapse.” However, geologists say that the occurrence of such incidences is really rare.

It is considered to be a catastrophic ground cover collapse if there is an abrupt collapse of the ground cover, a depression in the ground cover that is extremely visible, structural damage to the building and its’ foundation; and the insured structure being deemed unsafe for habitation that results in an order by governmental agency authorized by law to issue vacation of the property.

On the other hand, sinkhole coverage doesn’t need to meet all the criteria that qualify for a catastrophic ground cover collapse. Even if there is a sinkhole in your home, it doesn’t necessarily mean that a home is condemned.

Policy Coverage: What is Covered by Sinkhole Insurance?

Structural Damage

The damage caused by sinkholes to the structure of the property is covered by a sinkhole insurance coverage claim. However, the coverage is only limited to structures with walls and roofs. This means that the structure outside of your home isn’t covered by your insurance policy. If there are cracks in your pool, yard, deck, or driveway, your insurance policy wouldn’t cover for it. This is also the case for the catastrophic ground cover collapse insurance.

Personal Property

Movable things can also be insured under an umbrella policy for your sinkhole insurance. This allows you to file a claim in cases where the sinkhole damage extends to your personal property. High-valued items, such as jewelry, antiques, and paintings, may require a higher premium for added protection.

Temporary Living Expense

If a home is plagued by sinkhole damages, the residents may need to temporarily vacate the premises. In this case, the homeowner will need to organize a temporary living arrangement. During this transition of repair of the property, the insurance company is required to pay for all the living expenses incurred. The temporary living expenses will include accommodation and the cost of moving the things inside your home to your temporary living space.

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