Sinkhole vs. Catastrophic Ground Cover Collapse Coverage

If you live in Florida, you should have both.

Sinkhole coverage in Florida is just as important as Hurricane coverage. Here’s why.

 Sinkholes in Florida are as natural as the sunshine. It’s a given we are going to be Sinkhole prone since the makeup of Florida’s underlying rock is limestone. It’s better to be protected in the event of a Sinkhole than regretting not paying the extra premium. Repairing Sinkhole damage could cost homeowners without it thousands more than what it would for homeowners with it.

 What are they and what is the difference?

 I get asked this question a lot. Most people are unaware there is any difference. It’s an important question that can be easily answered, if not easily understood.

Catastrophic ground cover collapse” is defined as “geological activity that results in all of the following: 1). The abrupt collapse of the ground cover; 2). A depression in the ground cover clearly visible to the naked eye; 3). Structural damage to the building including the foundation; and 4). The insured structure being condemned and ordered to be vacated by the government agency authorized by law to issue such an order for that structure.” For the rest of the article this will be referred to as CGCC.

florida-sinkholes
credit: http://wwwslideshare.net/ricksender

 

Sinkhole” means a land form created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater. A sinkhole may form by collapse into subterranean voids created by dissolution of limestone or dolostone or by subsidence as these strata are dissolved.

They sound kind of the same, don’t they? The difference is all in the aftermath and the destruction caused.

 Why is it important to carry Sinkhole coverage?

 “Sinkhole loss” means structural damage to the building, including the foundation, caused by sinkhole activity. Contents coverage shall apply only if there is structural damage to the building caused by sinkhole activity.

This means that if your home is damaged by sinkhole activity, but does not meet all four criteria for CGCC (see above) – for instance, you may have foundation cracks, but the home is still livable – your insurance may not pay for the damage if you do not have sinkhole coverage.

Catastrophic Ground Cover Collapse
This is CGCC

FOR EXAMPLE:

  A Residence experiences a sinkhole on the property that takes out a shed, an attached garage and sinks half of the property. Amazingly the house is still intact and still livable. All that needs to be done is fill in the hole and rebuild what was lost. Unfortunately, the homeowners did not have the Sinkhole coverage added to their policy. Insurance company said it’s not CGCC because the house is still livable. Claim DENIED. All of the damages they now have to pay for.

Why don’t more people carry it if it so important?

 The easy answer. It’s hard to get.

If anywhere your neighborhood experienced a sinkhole in the last 5 years; you are not getting sinkhole coverage. First the request for coverage has to go through underwriting. Then, you have to have your property inspected by a licensed inspector that you get to pay for. (You’re looking at upwards of $300 for that.) Next, the inspector lets the insurance company know what they found. Then, the insurance company lets your agent know if you can or can’t get the coverage. It’s not guaranteed. If you don’t get the coverage, you are still out the money for the inspection.

It’s a lot of back and forth, so if you want it, please be patient with your agent they can only go as fast as the companies do.

Insurance companies make it difficult because when there is a sinkhole claim the damages are pretty substantial. Insurance companies aren’t in the business just to pay out claims so they tend to not write risks they see as bad ones.  Sinkhole coverage in an area prone to sinkholes is a bad risk. If you do find a company to cover you for sinkholes in an area bad with them, you will be paying a lot more in premium.

floridasinkhole
This is an example of CGCC.

It can cost how much?

 This is a very rough average. Keep in mind that the deductible for sinkholes is 10% of whatever you Coverage A is. That’s the amount your dwelling is insured for. So if your coverage A is $150,000, your sinkhole deductible will be $15,000. You may pay an extra $250-$1000 or more in premium depending on where you live.

The cost to repair according to eHow:

“Before you can take action to repair damages to your home, you must determine whether or not the damages are actually a result of a sinkhole. A professional geologist or engineer must come to the premises to perform tests including floor evaluations, ground penetration radar and standard penetration test borings. The average cost for an insurance company to perform the necessary tests was approximately $9,466, while the cost for individuals ranged from $8,061 to $10,116, at the time of publication.

Geologists employ two primary techniques for stabilizing the area, grouting and underpinning. Grouting involves injecting a mixture of grout, which is various amounts of cement, sand, flyash and water, into the ground to stabilize the subsurface soils. In underpinning, steel pipes are drilled into the ground to stabilize the home’s foundation. Both procedures are pricey, with the average cost for grouting a $150,000 home at $75,000 and underpinning costing an estimate of $35,000, at the time of publication.”

That sounds scary until you break it down. Once you see it, you’ll understand why you need it.

Estimated cost to repair $150,000 residence from example above:

Sinkhole w/ insurance Sinkhole w/o insurance
Inspect property $15,000 sinkhole deductible $10,000 out of pocket
Stabilize ground $15,000 sinkhole deductible $110,000 out of pocket
Repair garage $15000 sinkhole deductible $20,000 out of pocket*
Replace shed $15000 sinkhole deductible $5,000 out of pocket*
Total cost to homeowner $15,000 sinkhole deductible $145,000 out of pocket

*check with your contractor for actual cost

That was just an abbreviated list of what needs to be done. It may cost you a little bit more now but the future savings are completely worth it.

I’m sure you see that Sinkhole insurance is valuable. Even though it may be difficult to obtain the headache and money you save if a claim does arise may save you in the end.

GET THE COVERAGE!

 

For more information on the formation of Sinkholes and if your area may be affected the FL Dept of Environmental Protection has a great webpage dedicated to sinkhole information.  

Sheila Kennon

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