Coastal Erosion Insurance Coverage Leaves Gaps
Coastal Erosion Insurance Coverage may leave Southern California homeowners financially exposed as sinkholes, erosion and coastal flooding increasingly damage properties along the shoreline.
In Malibu, the driveway of an oceanfront home owned by actor Nicolas Cage recently collapsed, leaving a sinkhole measuring approximately 30 feet by 30 feet. In Seal Beach, powerful waves surged over a sand berm and flooded a residential neighborhood. At least 14 coastal homes in Dana Point also sustained damage to decks and parts of their structures.
The concern is that many forms of coastal damage may not be covered by standard homeowners insurance.
Coastal Erosion Insurance Coverage Often Excludes Land Movement
ABC7 reported Sept. 9, citing insurance experts, that sinkholes and beach erosion are typically classified as βearth movement.β Damage falling under that category is generally excluded from standard homeowners insurance policies.
If waves move inland and flood a home or garage, homeowners may need a separate flood insurance policy rather than relying on standard home insurance.
However, carrying earthquake or flood insurance does not necessarily mean all sinkhole and erosion damage will be covered. Sinkholes, land subsidence and gradual erosion may also be excluded from flood insurance policies. Earthquake insurance generally covers damage caused by an earthquake, but it does not automatically cover ordinary coastal erosion or sinkholes unrelated to seismic activity.
For coastal property owners, coverage can therefore vary significantly depending on the precise cause of the damage.
California Flood Insurance Enrollment Remains Low
Flood insurance coverage remains limited across California. According to a report released in April by flood insurance provider Neptune Flood, only 1.4% of homes statewide carried flood insurance.
Even in areas considered at high risk of flooding, the coverage rate was only 31%. Enrollment in the National Flood Insurance Program, commonly known as the NFIP, has also declined by 35% since 2016, the report found.
What Coastal Homeowners Should Review
Insurance experts advise homeowners to examine their current policies for provisions and exclusions involving flooding, earth movement and land instability.
Those living near the coast or in flood-prone areas should determine whether they need a separate flood insurance policy. They should also ask their insurance providers whether additional protection is available for sinkholes, erosion or other forms of ground damage.
Because Coastal Erosion Insurance Coverage depends heavily on how an insurer classifies the cause of a loss, homeowners should review their policies before damage occurs rather than assume they are fully protected.
