(Published on - 11/28/2019 4:32:40 PM)
For most people, the home is their single largest investment. So, when they decide to relocate to Florida and select their new home, it's a big deal. The astute buyer seeks to be informed about the community, the comparative value of homes that fit their budget and feature requirements, the material condition of the home, the cost of homeowner's insurance, and an array of other things that support an informed buying decision.
While the average buyer in Florida doesn't appear to give a second thought to the potential loss due to fire, hurricane, lightning strikes, and a host of other calamities, they have come to be very concerned about the potential for sinkhole loss. In Florida, a sinkhole can occur almost anywhere.
What is a Sinkhole? A sinkhole is essentially any hole in the ground created by erosion and the drainage of water. They can be just a few feet across or large enough to swallow whole buildings. Although they're often the result of natural processes they can also be triggered by human activity, such as poorly compacted soil during infrastructure and home construction.
There are two basic types of sinkholes, those that are created slowly over time causing ground cover subsidence and those that appear suddenly causing the ground cover to collapse. Ground cover subsidence in a development like The Villages is commonly the result of erosion due to poorly compacted soil. Poor workmanship. It's the sudden ground cover collapse sinkhole that creates headlines.
Catastrophic Ground Cover Collapse means 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 covered building, including the foundation;
- 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.
Homeowner's Insurance. Every insurer authorized to transact property insurance, homeowner's insurance, in Florida must provide coverage for a Catastrophic Ground Cover Collapse pursuant to (Florida Statutes 2017 627.706). The statutes require that the premium up-charge for such coverage should be reasonable, but the deductible can be as high as 10 percent of the homes insured value. Accordingly, sinkhole coverage is included within the provision of every homeowner's insurance policy.
Sinkhole Insurance. Additional coverage against sinkhole damage to the property is available from some insurers but it's expensive and the deductible can be as high as 20% of the insured value of the home. And typically requires that no sinkhole activity has affected the home or occurred within one mile of the home within the last three years.
The Financial Risk: Assume the buyer purchases and insures the home for $500,000 and the deductible for a sinkhole loss is 10 percent of the home's insured value. And the home experiences a total sinkhole loss of $40,000, including the cost of alternative housing while repairs are made and loss or damage to personal property. No matter what the loss, the homeowner is out-of-pocket at least $40,000. Never mind the emotional stress and inconvenience associated with the loss. The financial risk is the deductible and the incidental cost that may not be covered by insurance.
Sinkhole Remediation. The two types of remediation commonly employed are Underpinning in conjunction with grouting to fill any discovered voids and Grouting alone. Underpinning is the preferred method and can be warranted. Grouting alone may not sufficiently stabilize a home's foundation against future sinkhole damage and cannot be warranted.
Financial Protection: there are companies that warrant underpinned homes. One such company, StrucSure Home Warranty, provides five and ten-year warranties for underpinned homes backed by Lloyds of London. Of course, like any other home, the underpinned home could experience another sinkhole, but unlike homes that have yet to experience sinkhole damage, the underpinned home is unlikely to experience any structural damage.
The above is meant to provide some limited understanding of sinkholes and the related financial risks. For a more complete understanding consult a geological engineer and your homeowner's insurance provider.
Walter Coe, Ph.D. 06/10/2018 All Rights Reserved 352-516-3480