There has been a recent increase in sinkhole activity in Florida, consequentially leading to an increase in insurance claims. Experts believe the sinkhole activity is growing because developers are pumping more water out of the ground for new agricultural projects. One third of the sinkhole activity recorded since 1960 happened in the last 13 years; half of that occurred in the last three years.
The scary thing about sinkholes is that no one can neither predict a sinkhole disaster nor prepare for it, unlike hurricanes. It is impossible to know if a sinkhole will develop after a building is completed. As Florida’s population increases and development continues, sinkholes are expected to become a growing issue for homeowners, and there is no solution for this issue either.
The insurance industry in Florida has realized this issue and adjusted accordingly. Florida law requires insurers to cover “catastrophic ground collapse,” and many homeowners purchase additional riders to cover more minor damage.
Over the last several years, there has been a significant increase in the number of insurance claims for sinkhole damage. According to Office of Insurance Regulation, total reported claims in Florida increased from 2,360 in 2006 to 3,135 in 2010, according to information from the website of Citizens Property Insurance Corp. “The Florida Insurance Commissioner has identified sinkhole claims as a major cost-driver and expressed concern that these claims could threaten the solvency of Florida’s property insurance market.”
Sinkhole insurance can cost anywhere from approximately $200 to $2,000 depending on the location of your property. In 2012, Citizens collected $56.7 million in sinkhole premiums, but estimates sinkhole losses for 2012 totaling $18.7 million, according to its website.
