Here in NC, sinkholes are, fortunately, relatively uncommon. But, a few recent events, some of which are VERY close to our office, have prompted the question: “Does MY homeowners policy cover sinkholes?” The answer, unfortunately, is most likely no.
Only in states where sinkholes are common, like Florida and Tennessee, has legislation been passed that requires insurance companies to offer this coverage. Like the peril of flood, sinkhole coverage is a specifically excluded under most homeowners policies. Specifically, here is that exclusion:
SECTION I – EXCLUSIONS
A. We do not insure for loss caused directly or indirectly by any of the following…
2. Earth Movement
Earth Movement means:
a. Earthquake, including land shock waves or tremors before, during and after a volcanic eruption;
b. Landslide, mudslide or mudflow;
c. Subsidence or sinkhole; or
d. Any other earth movement including earth sinking, rising or shifting.
This exclusion A.2. applied regardless of whether any of the above is caused by an act of nature or is otherwise caused.
This exclusion is very broad and has been court-tested many times. If you are in an area where sinkholes are of concern, you should make arrangement to discuss the exposure with your agent and see if it’s possible to fill the hole (pun-intended) in your coverage. In some cases, your insurer may offer an endorsement or rider to carve back coverage. In other cases, you may need to purchase a separate policy to cover the peril of sinkholes.
This is another installment of: Please Read Your Insurance Policies: You’re Not Covered for Everything!