A Sinkhole’s as Bad as a Black Hole

iStock_000020254109XSmallJust a few weeks ago in Seffner, Fla., a sinkhole opened up underneath a home and swallowed a man who was still inside, according to the Orlando Sentinel. The unfortunate man is presumed dead at this point and the house has been severely damaged. Unfortunately, while a sinkhole of this size might be comparatively rare, sinkholes in general are not so rare and actually appear with some degree of regularity in areas of Florida. If you find yourself in a region where sinkholes and other earth disruptions might occur, you need to understand exactly the kind of insurance coverage available to you under your home insurance policy.

In the specific situation of sinkholes, the standard home insurance policy will not cover damage to your home because it’s considered “earth movement,” which is a standard exclusion. This exclusion also extends to damage caused by earthquakes and other underground events. However, in Florida and Tennessee, insurance companies are required by law to offer coverage for sinkholes. These two states tend to have more exposure to the phenomenon and the state departments of insurance have responded in kind to protect homeowners.

The coverage offered in Florida and Tennessee is not automatic and is not always built into the policy form. Insurers may endorse the standard home insurance policy to offer the coverage or they may actually sell you a separate policy in addition to your home insurance. In either event, you should seriously consider the coverage given the potentially catastrophic effect of a sinkhole on your property. You should consider that it’s not even similar to a fire or other natural disaster in that most disasters still leave your land intact. A sinkhole, on the other hand, destroys the land underneath your home. Not only would your house be destroyed, but you also may not even be able to rebuild it, as there would be a giant void where you house once stood. Keep in mind that this coverage is optional and you must choose to pay for the coverage. Otherwise, the default is that you will not be covered.

In addition to sinkholes, the earth movement exclusion on home insurance policies is very broad in that it excludes damage as a result of the sinking, rising, shifting, expanding, or contracting of earth. This pretty much sums up any type of earth movement that can cause damage to your home. It’s important to understand this very common and basic exclusion because it does have fairly significant implications for your home. Of course, insurance companies aren’t completely heartless! In situations such as sinkholes in Florida or earthquakes in California, specialized coverage is available that can remove some of the exclusions. In both of these instances, the state regulations require insurance companies to always offer you the coverage and advise you that your standard policy does not include it.

However, only you can make the evaluation for yourself as to whether or not the coverage is necessary. It’s virtually impossible to know if and when such an incident might strike and damage your home. You need to consider if you are willing to take the chance or would you rest more easily knowing you are insured?

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