Jeffrey Wade
Homeowners insurance is a type of insurance that provides coverage for your home and personal property in the case of a covered loss. It can also provide liability coverage if an accident or injury occurs in your home or on your property. While policies vary, a typical homeowners policy can provide insurance protection for the physical dwelling structure and other structures attached to it, as well as personal property. However, ordinary homeowner insurance policies do not usually cover damage caused by ground movements, such as sinkholes, landslides, or earthquakes. State Farm, the No. 1 home insurer in the country, does not cover sinkholes in most states, with the exception of Alabama, Florida, and Pennsylvania.
| Characteristics | Values |
|---|---|
| Does State Farm homeowners insurance cover sinkholes? | In most states, sinkholes are not covered by State Farm homeowners insurance policies. |
| Where does State Farm homeowners insurance cover sinkhole damage? | State Farm offers coverage for damage from sinkholes in only three states — Alabama, Florida, and Pennsylvania. |
| What does sinkhole coverage include? | Sinkhole coverage pays for repairing the foundation of a home and stabilizing the soil beneath it. |
| How to invoke sinkhole coverage? | To invoke sinkhole coverage, a homeowner must establish that their home has already experienced structural damage due to sinkhole activity or is in imminent danger of sinking into a sinkhole on their land. |
| What is not covered by sinkhole coverage? | Damage to a mailbox, fence, appliances, or other structures or personal goods caused by a sinkhole on or near a property is typically not covered by homeowners insurance. |
| How to obtain sinkhole coverage? | In some areas, such as Florida and Tennessee, home insurance companies must offer optional sinkhole coverage. If you're concerned about sinkhole activity in your area, you may be able to supplement your insurance with optional sinkhole coverage. |
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What You'll Learn
- State Farm offers sinkhole coverage in only three states: Alabama, Florida, and Pennsylvania
- Homeowners must obtain separate sinkhole insurance
- Home insurance companies in Florida and Tennessee must offer optional sinkhole coverage
- State Farm Florida asked for a 28% premium increase due to sinkhole losses
- State Farm denied increasing sinkhole denial rates
State Farm offers sinkhole coverage in only three states: Alabama, Florida, and Pennsylvania
Standard homeowner insurance policies typically do not cover damage caused by ground movements, such as sinkholes, landslides, or earthquakes. This is because sinkholes are not considered an insured risk, and therefore, require separate sinkhole insurance.
State Farm, the leading home insurer in the United States, does not offer sinkhole coverage in most states. However, State Farm does provide coverage for damage caused by sinkholes in three states: Alabama, Florida, and Pennsylvania. This is a notable exception to the general exclusion of sinkhole coverage in standard homeowner insurance policies.
Florida, in particular, has experienced a significant number of sinkhole claims, with costs reaching billions of dollars for property insurers in the state. The high frequency and cost of sinkhole claims in Florida have resulted in increased premiums for many insurance consumers in the state.
If you are a State Farm homeowner's insurance policyholder in Alabama, Florida, or Pennsylvania, it is important to understand the specific terms and conditions of your policy regarding sinkhole coverage. While State Farm offers this coverage in these three states, there may be variations in the level of protection provided and the circumstances under which it applies.
Additionally, it is worth noting that even in states where sinkhole coverage is not typically offered by State Farm, policyholders can consider supplementing their insurance with optional sinkhole coverage if they are concerned about sinkhole activity in their area. This optional coverage may provide financial protection in the event of structural damage to your home caused by sinkhole activity.
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Homeowners must obtain separate sinkhole insurance
Standard homeowners insurance policies do not cover damage caused by ground movements, such as sinkholes, landslides, or earthquakes. This is because sinkholes are not considered an insured risk. As a result, homeowners must obtain separate sinkhole insurance to protect their homes adequately.
Dwelling coverage, which is included in standard homeowners insurance, protects the foundation and frame of your home and insures it up to its replacement cost, starting with the lowest structural layer and ending with the roof. However, because it is not physically integrated into the home, dwelling coverage does not cover the land's surface beneath the home. The same is true for any additional constructions on your property, such as a detached garage, pool house, guest house, greenhouse, or tool shed, as well as your personal property.
In some states, such as Florida and Tennessee, home insurance companies are mandated to offer optional sinkhole coverage. Sinkhole coverage pays for the expense of repairing the foundation of your home and stabilizing the soil beneath it. To claim sinkhole coverage, you must establish that your home has already experienced structural damage due to sinkhole activity or is in imminent danger of sinking into a sinkhole on your land.
State Farm, the leading home insurer in the country, offers coverage for damage from sinkholes in only three states: Alabama, Florida, and Pennsylvania. In 2011, State Farm Florida dropped its sinkhole coverage in standard policies but began offering it to homeowners separately at a premium rate.
If you live in an area where sinkholes are common, you will likely experience higher costs for sinkhole insurance coverage. It is recommended that you contact your insurance company to understand your options for obtaining separate sinkhole insurance.
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$29.38
Home insurance companies in Florida and Tennessee must offer optional sinkhole coverage
Standard homeowners insurance policies typically exclude coverage for damage caused by ground movements, such as sinkholes, landslides, or earthquakes. This is because sinkholes are not considered an insured risk. As such, you must obtain separate sinkhole insurance to protect your house and property.
However, in some areas, such as Florida and Tennessee, home insurance companies are required to offer optional sinkhole coverage. This means that you can add sinkhole insurance coverage to your homeowners policy as an endorsement or rider. This is an addition to your standard insurance policy that modifies the coverage. While this is an attractive option for those in high-risk areas, it does come at an additional premium.
In Florida, home insurance companies are also required to provide "catastrophic ground cover collapse" coverage as a component of a standard homeowners policy. However, this is not the same as sinkhole insurance coverage. To be covered under catastrophic ground cover collapse, the ground must abruptly collapse, and there must be a clearly visible depression in the ground. Sinkhole coverage, on the other hand, pays for the expense of repairing the foundation of your home and stabilizing the soil beneath it.
To invoke your sinkhole coverage, you must establish that your home has already experienced structural damage due to sinkhole activity or is in imminent danger of sinking into a sinkhole on your land. It is important to note that even with sinkhole coverage, your policy may only cover the home itself and not any additional constructions or personal property.
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State Farm Florida asked for a 28% premium increase due to sinkhole losses
Standard homeowners insurance policies typically cover damage to the physical dwelling structure and other attached or detached structures on the residence property. Personal property is also covered, including furniture, appliances, clothing, and other valuables. Additionally, liability coverage is provided in the event of accidents, injuries, or property damage involving a third party. However, ordinary homeowners insurance policies do not cover damage caused by ground movements, such as sinkholes, landslides, or earthquakes.
State Farm Florida, citing sinkhole losses and higher operating expenses, requested a 28% premium increase on its homeowners' policies in 2011. The company testified that it had incurred significant losses, amounting to $327 million over the past five years, with the majority of those losses occurring in the last two years due to sinkhole claims. The rising number of sinkhole claims in Florida, which reached nearly $2 billion over five years, had significantly impacted the insurance industry. State Farm's non-catastrophe losses had increased by 94% over the previous three years, with the majority of the increase attributed to sinkhole claims.
In response to the growing cost of sinkhole claims, State Farm Florida sought to increase its rates for homeowners insurance statewide. The approved rate increase for Florida homeowners was 20%, lower than the company's requested 28%. While the rate hike fell short of their request, a State Farm spokesperson, Chris Neal, stated that the company could still continue doing business in the state.
It is important to note that, while standard homeowners insurance policies do not cover sinkhole damage, some states, including Florida, require insurance companies to offer optional sinkhole coverage. This coverage pays for repairing the foundation of a home and stabilizing the soil beneath it in the event of sinkhole activity. Homeowners concerned about sinkhole risk may consider supplementing their insurance with this additional coverage.
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State Farm denied increasing sinkhole denial rates
In most states, sinkhole damage is not covered by homeowner’s insurance policies from State Farm, the No. 1 home insurer in the US. The company covers damage from sinkholes in only three states: Alabama, Florida, and Pennsylvania. State Farm has experienced significant losses from sinkhole claims, which have approached $2 billion over the past five years in Florida alone. In 2011, State Farm Florida asked state regulators for a 28% premium increase on its homeowners' policies, citing sinkhole losses and higher operating expenses.
Despite these losses, State Farm has denied increasing sinkhole denial rates. In one case, a Maitland, Florida, woman claimed that State Farm refused to pay for sinkhole damage threatening to swallow her home. The woman, Betty Clark, had a full sinkhole policy and blamed the sinkhole for a ceiling ready to collapse, buckled concrete floors, and cracked walls. State Farm claimed that Clark did not disclose previous sinkhole damage, which delayed the process and required the owner's full cooperation.
In Florida, which has more sinkholes than any other state, there has been a spike in "frivolous" property insurance claims for sinkhole damage. These claims have contributed to increased premiums for many insurance consumers in the state. The surge in questionable claims led Florida Gov. Rick Scott to sign legislation designed to close the loophole that prompted the increase in claims. While most homeowners across the country aren't covered for sinkhole damage, those in sinkhole-prone areas should consider obtaining separate sinkhole insurance to protect their homes.
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Frequently asked questions
No, ordinary homeowner insurance policies do not cover damage caused by ground movements, such as sinkholes, landslides, or earthquakes. State Farm offers coverage for damage from sinkholes in only three states — Alabama, Florida, and Pennsylvania.
If a sinkhole opens up on your property, you should contact your insurance company. In the case of extensive damage, notify your county’s emergency management office.
You can find out if you live in a sinkhole-prone area by checking with the USGS (U.S. Geological Survey) or state geological surveys, which collect geological information about each state.
