The Sinkhole Dilemma: What Insurance Customers Need To Know

Investing in a home is an exciting time for any individual or couple hoping to build something for themselves instead of just signing away rent check after rent check. And while most of these homeowners are well-versed in the types of disasters to watch out for, there are still a few that fly under the radar, or as Dr. Thomas Jeffery of CoreLogic explains, “fall through the cracks.”

Jeffery is talking about sinkhole insurance, and while that may sound like one of those could-never-happen-to-me kind of things, it is a very real threat in parts of the country like Florida, which is built atop “thousands of feet of limestone, a porous and permeable sedimentary rock that over time can dissolve and leave behind a large underground void,” Insurance Journal reports.

“Sinkholes can be both naturally occurring or brought on by human factors such as when ground water is used for irrigation or consumption through increased residential development,” Jeffery states. “With over 23,000 sinkholes identified in the ever expanding CoreLogic sinkhole database … it is clear that Florida residents can continue to expect future property damage as a result of sinkhole activity.”

But Florida isn’t alone. In fact, as CoreLogic points out, Kentucky is the scene of the biggest sinkhole disaster the U.S. has seen in recent memory.

In February 2014, a sinkhole was formed under Bowling Green’s National Corvette Museum. This ended up swallowing eight cars, which were eventually rescued, and doing close to $3 million in damages. Here’s a link to CoreLogic’s full release.


What does all of this mean to the insurance agent-customer relationship?

Well, for starters, an agent’s customer should realize that sinkhole coverage is not typically included in the standard homeowner’s policy. Damages that result from a sinkhole — whether partial or fully — can be expensive and catastrophic, and should the customer live in a susceptible location, he’ll be forced to handle that bill out-of-pocket. Therefore, inform your client of this and encourage them to seek expert advice on whether they are living in a sinkhole-susceptible area if you don’t know yourself.

If your client wants to know why their standard homeowner’s insurance policy doesn’t cover sinkhole damage, point them to how sinkhole is defined by law. Florida is a great example of this. According to, Florida law defines a sinkhole as “a landform 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.”

The site continues: “Florida law defines catastrophic ground cover collapse as ‘geological activity that results in all the following: the abrupt collapse of the ground cover; a depression in the ground cover clearly visible to the naked eye; structural damage to the building, including the foundation; and the insured structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order for that structure.’”

In other words, sinkholes (not covered) are usually defined differently from ground cover collapse (covered).


In Summary

While a sinkhole is rare throughout the United States, there are certainly regions that are more susceptible than others, and it’s important that most states be on alert as the possibility exists everywhere to some degree. If your clients can stay informed, then they will be able to respond quickly and effectively should they experience this emergency. Make sure they know what to expect and how to prevent this from happening to them.

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