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QUESTION: Does flood insurance cover sink holes caused by underground water?

ANSWER: Sinkholes are geological movements that can disturb the foundations of insured homes. In those states where the local geology makes sinkholes more probable, they can be included in your homeowners insurance policies. Sometimes, this inclusion is automatic. Read your terms to see whether this is part of the cover. If not, you must negotiate for the cover to be added to the standard policy as a special endorsement. However, this approach is changing where the number of damaged properties is rising fast. So, for example, private insurers in Florida are now beginning to refuse cover and the lawmakers may be about to make it more difficult to claim. This is going to leave the states where sinkholes are a real problem with the decision whether they should offer a state insurance plan. This would match the federal provision for flood insurance in that the taxpayers would pick up the bill for any losses where the payment of claims exceeds the amount of premiums collected.

To answer your question directly, flood insurance under both the current federal and private cover does not cover any damage to your home that might be caused by sinkholes. To give you the right to claim, the cause must be proximate. A flood is water damage to your property, not a hole opening underneath the property. If the hole is caused by the level of groundwater dropping, this is one step removed from the cause of the damage. The most proximate causes are the suBsequent drying of the ground and the collapse of the ground where the clay base is at its weakest. So your only claim is under your homeowners or commercial property policy if you have the appropriate terms in place.

QUESTION: Can an insurance co raise your rate for a claim that was put in with another insurance co two months before you had them?

ANSWER: When you ask about how to claim or actually make a claim on your home insurance policy, it is registered in two separate databases. One is called CLUE, the other A-PLUS. These databases are an information exchange used by the insurance industry and they both generate a score. This score works in exactly the same way as your credit rating. So if you make a claim, this will affect the way every other insurance company assesses your risk profile and, unfortunately, if you claim from Company A, Company B may decide you are more likely to claim against it and raise the rates.

Depending on the extent of the claim you made, it's possible that your second company may refuse to renew the policy when it expires. It's also possible other insurance companies may be reluctant to take you on.

Some states have now passed laws to limit reliance on CLUE reports and insurance scores, and there's considerable controversy inside the National Insurance Commissioners Association on how to formulate a coherent national policy on this. It's possible your state has laws to protect you. If not, you should ask your insurance commissioner for help. Under the FACT Act, you are entitled to a copy of the information held by CLUE and A-PLUS. If you find any mistakes, you have a right to have the errors corrected. Your stat'es Insurance COmmissioner should advise you on your rights.