All About Sinkhole Coverage

All About Sinkhole Coverage

One of our Insurance Carriers, Tower Hill Insurance Group has created a great video explaining how Catastrophic Ground Cover Collapse (CGCC) is covered by your homeowners insurance policy.If you’d like to learn more about this coverage in regards to your policy please contact us.

Below please find the transcript from the video featured in this article.

Hi, this is Joel Curran coming to from the Tower Hill Insurance Group, LLC offices in Gainesville, Florida, where we have been serving the insurance needs of Floridians for 40 years.

Florida has changed a lot over those 40 years. We’ve had some of the worst hurricanes on record, like Andrew in 1992 and the 2004 – 2005 season when Tower Hill Insurance Group, LLC paid out more than $2 billion to repair homes in Florida. We have also seen huge changes in the way we communicate and do business.Most recently, Florida’s sinkholes have been getting a lot of attention on TV and radio, on the Internet in general, and on social networking sites especially.

One question we see are seeing more and more frequently on Facebook and Twitter is, “I see I have a 10% sinkhole deductible, can you tell me how that works?” Well I can do that. But let me first give some background information and explain a little bit about sinkhole loss coverage.

Across the country homeowners and dwelling fire policies are rather standard in most coverages. Earth movement is excluded in these policies. While most people think this applies to earthquakes, it also means sinkholes in Florida would not be covered. However, policies are modified in Florida to cover damage from sinkholes.

There are two types of coverage for earth movement in Florida: Catastrophic Ground Cover Collapse, known as CGCC, and Sinkhole Loss Coverage. CGCC covers you in cases you often hear about in the news, where a sinkhole opens up under or near a house and there is considerable damage.

All homeowners’ insurance companies provide it. The normal policy deductible applies, so the same deductible you would have for a theft or a fire loss applies to CGCC. To qualify as a CGCC there needs to be 4 components

  • An abrupt collapse of the ground.
  • A visible depression in the ground.
  • Structural damage to the building.
  • The insured structure being condemned and ordered to be vacated.

Sinkhole Loss Coverage is different. Because there are 2011 Statute changes impacting this coverage, my comments will address policies written new in 2012. First of all, sinkhole loss coverage is optional. You do not have to buy it. Sinkhole loss coverage is also different in that not all the 4 components need to be present.

However, there must be actual structural damage to the house and/or foundation, not just cracks to things like exterior walls, driveways, or interior walls around doors or windows. Of course, the damage must also be shown to have been caused by sinkhole activity. If the damage is eligible for coverage, then your policy will require you to pay the sinkhole loss deductible, then the insurer will pay the remaining costs of repair.

The sinkhole loss deductible applies to sinkhole loss coverage only, and at Tower Hill Insurance Group, LLC it is 10% of your Coverage A amount. Coverage A applies to the house itself, as opposed to other structures, or your possessions in the house. Let’s say you insure your home for $200,000. The sinkhole deductible is 10% or $20,000. In the event of a Sinkhole Loss Coverage claim, you would need to pay the first $20,000 in repairs, and as repairs are completed, Tower Hill Insurance Group, LLC would pay the remaining amount to repair your house.

Let me give you an example for a policy that would be written today. OK, the home is valued at $200,000 and the deductible is $20,000. The initial testing is paid for by the insurance company. Further testing may include a contribution from the insured, but if there is structural damage and sinkhole activity is present, then the company pays for all the testing. Then we get a contractor estimate and bids. Let’s say the cost to repair the foundation is $45000, and the cost to repair the home is $10,000. Once you contract to repair the home you will pay the contractor the first $20,000. As work continues we will pay the balance of the foundation repairs which are $25,000. We will also pay the $10,000 to repair the home.

Well that’s a quick recap of sinkhole coverages and how the deductible works. We at Tower Hill Insurance Group, LLC certainly hope that you do not experience damage to your home, but if you do, we pride ourselves on handling your claim promptly and fairly. After all, we have been doing it for 40 years.

Thanks for watching and thanks for using our social media sites.