Background
There are two coverage options for sinkhole insurance:

 

• Catastrophic Ground Cover Collapse, defined as a sudden occurrence that damages a building so severely that it is declared uninhabitable.  Insurance companies are required to provide this coverage.

• Comprehensive Sinkhole Loss Coverage, for structural damage to a covered building, including the foundation. This is optional coverage available for an additional insurance premium

It is very rate for a sinkhole to damage a home so completely that it would be condemned. Going without comprehensive sinkhole coverage will save a homeowner on their insurance costs, but repairing sinkhole damage without property insurance could mean high out-of-pocket costs.

2011 Legislation
Effective July 1, 2011, coverage for catastrophic ground cover collapse and comprehensive sinkhole loss are restricted to the principal building, as defined in the insurance policy. Insurers are now allowed to require a property inspection prior to issuing sinkhole loss coverage.  One of the reasons for the enormous rise in sinkhole claims was the lack of a clear definition of “structural damage” for sinkhole losses. There is now provided a statutory definition of “structural damage” that incorporates five distinct types of damage and restricts damage to the main building, including the foundation.

A new process for investigating sinkhole claims was also created. Insurers may continue to deny a claim if they determine there is no sinkhole loss. However, if the insurer denied the claim without sinkhole testing, a policyholder can demand sinkhole testing in writing within 60 days. If policyholders request such testing, they must pay for half the testing cost, up to $2,500 – and if the testing confirms a sinkhole loss, the insurer must reimburse the policyholder.

In January 2010, insures in Pasco and Hernando counties were allowed to non-renew sinkhole coverage and offer coverage instead for catastrophic ground cover collapse. The change was designed to help homeowners lower the cost of their insurance in two counties with a high number of sinkhole claims.