After analyzing the sinkhole cases and insurance policy toward sinkholes, it is critical to understand why thinks look the way they are --- why insurance company cover sinkholes in general. According to the U.S. Geological Survey, it is estimated that 35% to 40% of the land areas in the United States are susceptible to sinkholes. This statistic show that potential sinkholes damages are threatening millions of homeowners across the country.
Like typical threats to the houses such as theft, broken window and fire, sinkholes is becoming another hidden threat which can cause severe damages to the houses and financial distress to many family. One might argue that those who live in areas that sinkholes are less likely to happen and such people are immune to the damages caused by sinkholes. However, nothing is absolute. According to Trusted Choice, sinkholes not only can be caused by the act of nature such as erosion of the earth’s surface or the emergence of excess groundwater but also can be caused by human activities like careless construction, excessive drilling and mining. Since human activity can also cause sinkholes, theatrically speaking, every homeowner, even not living in the …show more content…
At that time, insurer would need to pay more than they should pay. These are the reason why insurance companies don’t want to cover or restricted the sinkholes. In fact, insurance companies, along with legislative party, are trying to mitigate this moral hazard problem. The newly defined sinkhole is stricter which makes filling claims more difficult to ensure only big losses caused by sinkholes are covered. In addition to that, many insurance company is setting a more harsh policy with high premium and place an extremely high deductible of 10 percent. In comparison, the deductible for hurricane is only 2 percent to 5
Like typical threats to the houses such as theft, broken window and fire, sinkholes is becoming another hidden threat which can cause severe damages to the houses and financial distress to many family. One might argue that those who live in areas that sinkholes are less likely to happen and such people are immune to the damages caused by sinkholes. However, nothing is absolute. According to Trusted Choice, sinkholes not only can be caused by the act of nature such as erosion of the earth’s surface or the emergence of excess groundwater but also can be caused by human activities like careless construction, excessive drilling and mining. Since human activity can also cause sinkholes, theatrically speaking, every homeowner, even not living in the …show more content…
At that time, insurer would need to pay more than they should pay. These are the reason why insurance companies don’t want to cover or restricted the sinkholes. In fact, insurance companies, along with legislative party, are trying to mitigate this moral hazard problem. The newly defined sinkhole is stricter which makes filling claims more difficult to ensure only big losses caused by sinkholes are covered. In addition to that, many insurance company is setting a more harsh policy with high premium and place an extremely high deductible of 10 percent. In comparison, the deductible for hurricane is only 2 percent to 5