4 Facts About Sinkholes and Insurance

April 2, 2020

We’ve all seen images of sinkholes in the news. Whether it’s a giant hole opening up and swallowing an entire house, or an area of the road that suddenly washes away and carries a car with it, sinkholes are scary. Here’s what you need to know about sinkholes in the United States—and how to protect yourself and your property. 

A sinkhole is a cavity that forms underground when water erodes an underlying layer of rock (such as limestone or dolomite). Without an underground layer of rock to support the land above it, the land collapses and creates a giant hole in the ground. Sinkholes can vary greatly in size, anywhere from a few feet wide by a foot deep to an area covering several acres and plunging more than 100 feet. 

Sinkholes have both natural and manmade causes. In either case, what appears to be stable ground can suddenly collapse without warning.

• Natural sinkholes typically form in areas where water dissolves underground rock that is susceptible to erosion. Over time, the water that flows underground dissolves small amounts of rock and carries them away, eventually leaving large cavities under the earth’s surface. As the underground cavity grows larger, the land above it can give way and collapse, causing a sinkhole.
• Manmade sinkholes are created when human development compromises the integrity of the surrounding underground rock. For example, the construction of roads, bridges, and buildings may cause water to collect underground and wash away the supporting layer of rock. Over time, just as with a natural sinkhole, eventually the land above the road, bridge, or building can collapse as the underground cavity grows bigger.

While it’s possible for a sinkhole to occur anywhere, sinkholes are most common in Alabama, Florida, Kentucky, Missouri, Pennsylvania, Tennessee and Texas. Disclosure 1 1 U.S. Geological Society, “Sinkholes,” accessed March 30, 2020, https://www.usgs.gov/special-topic/water-science-school/science/sinkholes(opens in a new tab)  Even though the risk of a catastrophic sinkhole happening is low (researchers put it at a 1-in-100 chance of occurring in any given year), it’s still important to ensure your property is covered if you live in a state where sinkholes are more likely to happen. Disclosure 1 1 U.S. Geological Society, “Sinkholes,” accessed March 30, 2020, https://www.usgs.gov/special-topic/water-science-school/science/sinkholes(opens in a new tab)

Homeowners insurance policies are priced to exclude the real estate value of land. Basically that means if a catastrophe destroys your home, the homeowners policy is intended to cover the cost to rebuild your home on the same piece of land. This is why most homeowners insurance policies typically exclude coverage for damages caused by “catastrophic earth movement”—things like earthquakes and sinkholes.

If you live in Florida (one of the states where sinkholes are most common), property insurers are required to provide coverage for “catastrophic ground cover collapse” as part of their standard homeowners insurance policy. According to the Insurance Information Institute, this coverage is for damage that is severe enough to make the home uninhabitable and must meet the following criteria: Disclosure 2 2 Insurance Information Institute, “Sinkholes and Insurance,” accessed March 30, 2020, https://www.iii.org/article/sinkholes-and-insurance(opens in a new tab)

• An abrupt collapse of ground cover.
• A depression in the ground cover that’s clearly visible to the naked eye.
• Structural damage to the covered home, including the foundation.
• A government agency (authorized by law) must have condemned the insured home and ordered it to be vacated.

Some states (such as Tennessee and Florida) require insurers to offer optional sinkhole coverage for an additional premium. Disclosure 2 2 Insurance Information Institute, “Sinkholes and Insurance,” accessed March 30, 2020, https://www.iii.org/article/sinkholes-and-insurance(opens in a new tab)  Depending on the mandates established by state insurance regulators, sinkhole coverage can be offered either as an endorsement to a homeowners insurance policy or as a stand-alone policy.

If you live or own property in a state that’s a higher risk for sinkholes (Alabama, Florida, Kentucky, Missouri, Pennsylvania, Tennessee or Texas), we encourage you to talk with your insurance agent to find out if additional coverage is available to protect your home from sinkhole damage.