Does Your Insurance Cover Sinkholes?

3/6/2013
By: William Mansell
Dunedin Patch

Should you be worried if your property is protected from an unexpected sinkhole?

Sinkholes are scary, loud, damaging and can come without a moments notice. Does that mean, however, that you cannot prepare at all? 

Can your purchase property insurance that covers sinkhole damages?

According to Florida Statute 627.706, in most cases, the answer is yes: 

"Every insurer authorized to transact property insurance in this state must provide coverage for a catastrophic ground cover collapse.

The insurer shall make available, for an appropriate additional premium, coverage for sinkhole losses on any structure, including the contents of personal property contained therein, to the extent provided in the form to which the coverage attaches. The insurer may require an inspection of the property before issuance of sinkhole loss coverage. A policy for residential property insurance may include a deductible amount applicable to sinkhole losses equal to 1 percent, 2 percent, 5 percent, or 10 percent of the policy dwelling limits, with appropriate premium discounts offered with each deductible amount."

To read the fine print and more details of the law, click here. 

While current property insurance policies should include coverage for sinkhole damages, there are exceptions. 

According to the Florida Department of Environmental Protection, an insurance company can deny you sinkhole coverage if a sinkhole has been reported in a nearby "area" of the property you are wishing to insure. 

"Currently, an insurance company has the right to not issue an insurance policy on the basis of sinkholes in the “area.” The definition of “area” remains subjective, and the issue will likely only be resolved through specific legislation, or by the general adoption of a standard by the insurance industry. Some companies utilize private sinkhole data to assign relative sinkhole risk (see question #12). Other companies may have more liberal policies, and you may wish to shop around for other insurance that may be available."

In an interview with WTSP, State Rep. Mike Fasano said there has to be remedy to allow more homeowners to protect their homes. 

"If you fix a sinkhole according to the engineer's requirements then no company should then drop you. That should be against the law in the state of Florida," Fasano told WTSP. 

According to the Christian Science Monitor, more recent sinkhole claims have caused insurance rates to skyrocket. 

"We ended up with an enormous explosion in the amount of sinkhole claims coming forward,” says Robin Westcott, Florida’s Insurance Consumer Advocate, in a telephone interview with the Monitor. “We were handing out checks to people with cracks in their driveways and patio for sinkhole damage and it didn’t mean repairs were required. There was not a clearly defined threshold for what structural damage was covered.”