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Sinkholes are common in most parts of the United States, but some states – especially in the South – experience them frequently, and the damage can be devastating.
Unfortunately, a standard home insurance policy does not cover sinkholes. If you live in an area that is prone to sinkholes, you should purchase sinkhole insurance.
Here’s what you need to know about how sinkhole insurance works and whether you should consider buying it:
What is sinkhole insurance?
Sinkhole insurance is a type of insurance that provides financial protection if a sinkhole damages or destroys your home. This can happen if moving water dissolves rocks beneath the earth’s surface, creating cracks or caves that weaken the surface, eventually causing the land to collapse.
Depending on the type of assistance you purchase, it may cover the cost of repairing or rebuilding your home and other buildings on your property, including repairing the foundation and stabilizing the land your property has been on. It may even cover the cost of removing personal property that is damaged or lost during a serious event.
How does sinkhole insurance work?
Sinkhole insurance can come as an add-on to your homeowner’s insurance, or a separate policy. When you apply for sinkhole insurance, the insurance agent will inspect your property before approving your policy.
If a sinkhole occurs and you have coverage, you need to prove that your home is damaged or in danger. Evidence may include structural walls and movement of floors or foundations. You will need to hire an expert to determine the damage and cause.
Who needs sinkhole insurance?
The countries in the chart below are the most damaged by water wells, according to the US Geological Survey (USGS).
However, evaporite rocks, which are a type of rock that can dissolve in water, make up between 35% and 40% of the U.S. The good news is that most of these rocks are underground, so the risk is low. If you live in an area where sinkholes are common, contact your insurance agent to inquire about sinkhole insurance.
Florida is a serious ground cover fall
If you’re a Florida resident, your homeowner’s insurance policy includes fall disaster coverage. This may cover sinkhole damage, but only if the sinkhole causes the following:
- Sudden collapse of the bottom cover
- A depression in the lower lid that is visible to the eyes
- Structural damage to the building, including the foundation
- The government is attacking your house and ordering you to leave.
If one of these things isn’t played out, you won’t be covered, so it may make sense to purchase additional sinkhole insurance.
See: Does Home Insurance Cover Water Damage?
How much does sinkhole insurance cost?
The cost of sinkhole insurance varies depending on where you live and your property. In some cases, it can cost thousands of dollars a year in fees.
Like many other insurance policies, sinkhole insurance requires a deductible, which can be 10% of the limit you live in. So, if you have $500,000 in equity, you would have to shell out $50,000 in the event of a sinkhole.
But even though the insurance premium may be more expensive for you, the insurance carrier still faces the problem of repairing or rebuilding your home.
What insurance companies offer sinkhole insurance?
It can be difficult to find sinkhole insurance in countries where the risk is low. Even in high-risk environments, options can vary.
In Florida and Tennessee, insurance carriers are required by law to offer sinkhole coverage as an add-on to homeowner’s insurance. However, the insurer may decide to deny coverage based on an assessment of your property. In Missouri, you can purchase an independent health plan through the Missouri FAIR Plan.
It’s a good idea to consult with an insurance professional to understand where you can get coverage and what it covers. You can visit National Association of Insurance Commissioners website to find insurance agents in your area.
Learn more: Home Insurance Exclusions: What’s Not Covered?
Is sinkhole insurance necessary?
Sinkholes cause damages of about $300 million or more per year, according to a report from the organization Committee on the Environment. But the federal government doesn’t have enough data to know how many cases occur each year.
If you live in an area where sinkholes tend to do a lot of damage, they should be on your radar. Consider connecting your country’s geological survey or National Society of Professional Surveyors to understand the risk in your area or the investigation that took place in your area.
Once you have a good understanding of your risk, calculate the cost of buying a policy and the deductible you will have to pay. Remember, however, that if you are at risk, even a policy with a 10% deductible can save you hundreds of thousands of dollars.
Continue Reading: Does Home Insurance Cover for Natural Disasters?
Disclaimer: All insurance related services are provided through Young Alfred.