You might have noticed that sinkholes have been in the news lately here in Florida, and as always my goal is to keep you informed, so here is what both current and future residents of The Villages need to know.
But first, a few disclaimers:
1) While the information in this article is geared more towards The Villages, it applies to pretty much anyplace you decide to live in Florida.
2) This is not an issue strictly limited to The Villages, and I don’t believe (nor should you think) that theres any more or less sinkhole activity in The Villages than other areas of Florida.
Read: I’m not out to alarm anyone here. Only to inform and educate.
3) And finally, as with any information you read, its up to you to do your own investigation and research. I’m just here to help guide you in the right direction.
With those things in mind, here we go…
Sinkholes are a fact of life in many parts of the country, not just Florida. Unfortunately, The Villages is not immune to them either. There have been several confirmed sinkholes in The Villages over the years, often occurring after extended period of heavy rain.
What Causes Sinkholes?
I found this article particularly helpful in explaining why and when sinkholes occur when they do. Here’s the money quote:
February is usually when the state is at its driest, but it’s also the start of the rainy season. Acidic rain can, over time, eat away the limestone and natural caverns that lie under much of the state, causing sinkholes. Both extremely dry weather and very wet weather can trigger sinkholes. An extensive drought can cause soil and sediment over a cavity to be extremely dry and collapse. On the other hand, following Tropical Storm Debby in 2012, dozens of sinkholes formed in counties north of Tampa because of the rain.
For your reference, here are links to some other articles I came across during my research that have been written about sinkholes, specifically in The Villages, over the last 11 years:
Sinkholes Plague Villages (2002)
Sinkhole Insurance in Florida: Comprehensive vs. Catastrophic
Just like we can’t predict the weather, it seems that nobody can predict with any kind of accuracy where or when a sinkhole may occur next.
But what you can do is make sure that you take the proper steps to protect your financial investment in the unlikely event a sinkhole directly affects you.
Here’s a recent email I received from a concerned reader:
As someone that is moving to Florida by April 1st I would like to learn more about the state of the optional sinkhole insurance in FL when you buy a house that is not newly built. Can you even get coverage and if so how?
I will add I’ve spoken to many people that are considering not moving to Florida in the future because of the change in the insurance laws and how unclear it is if they can get coverage, they are worried about losing their investment to sinkhole damage. People freak out about sinkholes even though many areas of the country can and do get them.
Optional sinkhole insurance is the main reason we are considering buying a new home, it does worry me that if we ever need to sell the fear of not being able to get insurance might make it harder to sell it sometime in the future.
To help answer this readers questions, I reached out to a number of real estate agents and insurance agents working in The Villages to get their thoughts.
Because I myself am not an expert on insurance, I’ve chosen to paste their responses exactly as I received them, basically so I keep from screwing anything up 🙂
Here are their unedited responses:
Real Estate Agent #1 –
Yes we have sinkholes. All of central Florida does, just as many parts of the US has Radon Gas, earthquakes or tornadoes.. An informative website is: http://www.dep.state.fl.us/geology/geologictopics/sinkhole/florida_sinkhole_poster.pdf
Insurance has become more challenging as many companies have opted not to issue sinkhole riders. All Florida homeowners policies have catastrophic loss coverage if your home becomes inhabitable due to a sinkhole. If your home receives minor damage due to sinkholes then you may not be covered. It is best to discuss coverage with various insurance provides before you buy. If your are buying a resale home from a MLS agent you can write the purchase contract so it is contingent upon getting an acceptable insurance quote within a stated time frame. It is best to do your insurance homework ahead of time and before you make the offer. The Florida Citizens Insurance website helps Florida residence secure coverage when other companies deny issuing policies. Go to: https://www.citizensfla.com/
Your reader mentions that they would prefer to buy new because of this issue. They better do their homework, because a new home does not mean you are protected.
The sinkhole issue is sometimes over rated. The MLS agents are required to disclose of any known sink hole activity on a house they are selling. A buyer should also ask for a seller’s disclosure because that subject is addressed either as sinkhole or expansive soil. If their sales person does not provide one ask for it!!!!!!
The percentage of sink hole problems is small. The bigger problem lies in scammers scaring homeowners into making insurance claims for thousands of dollars for typical settling cracks in foundations, sidewalks and driveways. That is what created the sinkhole insurance problem. Yes, The Villages does have sinkholes. I hope this helps answer your questions.
Real Estate Agent #2 –
Sinkhole coverage is definitely a hot issue right now – you can still get it, though – Sumter Marion Ins (The Villages company) writes it still, as does Robert Blakeley in Leesburg – they are writing traditional policies (I just got one on my personal home) but are now in the minority.
Other companies are going to what is called “catastrophic ground collapse” instead of sinkhole coverage – and the bugaboo is that the home has to really be affected for coverage to kick in – companies will tell folks that it covers sinkholes, and it does to some degree, but of course it’s written by insurance companies to give them a whole lot more leeway to say no.
Some those that are still doing sinkhole coverage are also changing to a special deductible for the sinkhole (similar to a hurricane rider that is on most policies) and I’ve seen some of the deducts specified as 10% to 25% of the damage that occurs – still coverage, but not as good as paying a $1000 deductible and having the ins company handle the remainder.
Insurance Agent #1 –
Comprehensive sink hole coverage is somewhat challenging while catastrophic ground collapse (CGC) is not. The insurance commissioner’s office requires every company selling homeowners in Florida to provide CGC coverage. Basically this coverage states that if a sinkhole opens up under your home and it is deemed unsafe for habitation then you are covered.
Comprehensive coverage is just that – ANY major structural damage while CGC is as described above.
CGC is built into quotes while comprehensive adds $400 to $600 annually. 10% is the deductible we use, but sink hole repair including testing is between $50,000 and $100,000
Each company is different, some require inspections and some don’t.
Insurance Agent #2 –
Typically I refer folks to the web to research the Florida OIR’s
“sinkhole” and “catastrophic ground collapse” definitions. Then we can talk
through the differences and what it would take to secure “sinkhole” coverage if they still want it.
I inform them that out of our 42 property carriers, a limited # will offer
sinkhole with a 10% (of their coverage A limit) deductible and possibly
require an inspection (that they have to pay for) before the carrier will
even consider an offer of coverage.
Not “hard” to get it if your home is new. However, the deductibles will be
high, the coverage will be relatively costly and they will have a limited
selection of carriers.
It may be virtually impossible to secure this coverage if you home has
driveway, walkway or stucco cracks.
Once you get past the high deductible, a claim will be paid on a
“replacement cost” basis, assuming repairs are actually performed.
The cost depends upon the your coverage A (dwelling) replacement value. In The Villages, it can run between $200 and $600 annually.
Most carriers require that you pay 50% of the inspection cost or approx.
$70. The inspection does not guarantee coverage. In fact the % of securing
sinkhole coverage for a home 5 years or older is 50% – 50% at best.
So it basically boils down to your tolerance for financial risk, just like any other decision about insurance that you choose to carry or not carry.
If you decide that you do in fact want comprehensive coverage in addition to the catastrophic coverage, from what it sounds like your best bet is to contact as many companies as possible to get quotes.
From the above responses its clear that despite what many people claim, coverage is available, you just have to hunt for it and be willing to pay the price. For some the effort and expense will be worth it, for others it won’t.