This spring, I received a call that all advisors dread. It was following the spring rains and a client who lives in St. Louis County called to let me know that they woke up with a sink hole in their backyard and had some damage. Unfortunately, at the time of writing the policy we had discussed sinkhole coverage and they had opted against the additional premium it would have required to choose an insurance company that provided the coverage. A little known fact is that most insurance companies exclude coverage for sinkholes. I unfortunately had to remind them there was no coverage for sinkholes in their policy. Then another occurred in downtown St. Louis swallowing an entire vehicle!
That prompted me to do some research and to my surprise sinkholes are common in Missouri. Around 15,000 have occurred throughout the state. Missouri is known to most of us as the Show Me State, but it has another nickname: The Cave State.
The US Geological Survey listed Missouri as one of seven states most prone to sinkholes and it’s because of how many caves we have here (source 1). I also learned that Missouri has the perfect soil/bedrock combination to create sink holes. For a sink hole to occur, dissolution of carbonate bedrock or collapse of underlying caves must occur, and Missouri soil is full of bedrock. That makes it the worst combination, especially when too much rain occurs.
What does this mean to you? Consider the coverage! Just like earthquake coverage, not everyone is at risk of a sinkhole destroying their home. But if you are at risk (and most people think they aren’t), a sinkhole can be a devastating loss. If a sinkhole occurs and you don’t have coverage, the out-of-pocket expenses you could face can add up very quickly. My unfortunate client had to hire a structural engineer evaluate the sinkhole and options their family had to make the home livable again. In the meantime, they had to rent an apartment to live for 6 months and were stuck footing the bill for both a mortgage payment and the rental place at the same time.
Unfortunately, not many carriers offer sinkhole coverage, but the good news is there are still a few carriers that do and their pricing is usually pretty competitive with the rest of the industry. I usually recommend my clients at least consider these markets as an option, even if they are a little more expensive because the value of the coverage seems worth it to me. In my opinion, the whole point of insurance is to provide coverage for you if something catastrophic happens. A sinkhole damaging your home certainly fits that definition to me.