Natural disasters are a threat to every American, from wildfires in California to hurricanes in Texas and to floods in West Virginia. A report released by the government regarding climate change and its impact on Black Friday says that such catastrophes are only going to get worse. Despite this, many homeowners still lack the insurance they need to protect their property from calamity. According to United Policyholders (UP), a nonprofit organization for insurance consumers, about two-thirds of homeowners are underinsured for natural disasters.
One contributing factor to this lack of coverage is the mistaken belief that homeowners insurance offers protection from such calamities when in reality, natural disasters are typically not covered by standard homeowners policies. In order to obtain protection, you often need to purchase separate policies that cover specific types of natural disasters. Here, we’ve highlighted the types of insurance coverage available and how the policies work.
While homeowners insurance typically doesn’t pay for damage caused by natural disasters, most policies do protect against fire damage, including wildfires like the recent ones in California. The only instances of fire damage homeowners policies won’t cover are fires caused by arson or when fire destroys a home that’s been vacant for at least 30 days when the fire occurred.
We bring it up because not all homeowners policies are created equal, so you should check your policy to make certain that it includes enough coverage to do three things: replace your home’s structure, replace your belongings, and cover your living expenses while your home is being repaired, known as “loss of use” coverage. In certain areas that are extremely high-risk for wildfires, it can be difficult to find a company to insure your home. In such cases, you should look into state-sponsored fire insurance like California’s FAIR Plan.
Earthquakes are typically not covered by homeowners policies so to protect your home against quakes, you’ll need a freestanding earthquake insurance policy. Contrary to popular belief, Californians aren’t the only ones who should be worried. Most parts of the U.S. are at some risk for earthquakes. According to the U.S. Geological Survey, between the 20 years from 1975 to 1995 earthquakes occurred in every state except Florida, Iowa, North Dakota, and Wisconsin. To gauge the risk in your area, consult with the Federal Emergency Management Agency’s (FEMA) earthquake hazard map.
While earthquake insurance is available practically everywhere, policies in high-risk areas typically come with high deductibles, ranging from 10% to 15% of the home’s value. What’s more, though earthquake insurance covers damage directly caused by the quake, some related damages such as flooding are likely not covered. Carefully review your policy to see what’s included and what’s not.
Though homeowners insurance generally covers flood damage caused by faulty infrastructure like leaky pipes, nearly all policies exclude flood damage caused by natural events like heavy rain, overflowing rivers, and hurricanes. You’ll need stand-alone flood insurance to protect your property and possessions from these events.
The threat from flooding is so widespread, Congress created the National Flood Insurance Program (NFIP) in 1968, which allows homeowners in flood-prone areas to purchase flood insurance backed by the U.S. government. In some coastal regions, especially where hurricanes are prevalent, you might even be required to buy flood insurance. To determine the risk for your property, consult FEMA’s Flood Map service center.
Even if you live in a location where flood insurance isn’t required, you may want to consider buying it anyway. 90% of all natural disasters include some form of flooding and more than 20% of flood-damage claims come from properties outside high-risk flood zones.
Hurricanes and Tornadoes
Most homeowners policies do offer coverage for wind-related damage, but it depends on the type of storm that caused the damage. For example, wind damage from tornadoes and even some tropical storms is typically covered, but wind damage from hurricanes generally requires a separate windstorm policy, or in some cases, a hurricane rider.
Because damage from hurricanes is often measured in the billions, these windstorm policies usually have higher deductibles that are often based on a percentage of your home’s value, instead of a fixed dollar amount. Some policies also come with a cap on coverage so be sure to review exactly what type and amount of coverage your policy offers.
Of course, high winds aren’t the only threat posed by hurricanes. Such tropical systems can also cause severe flooding, which is frequently the storm’s most damaging element. As mentioned before, whether it’s caused by a hurricane or a tornado, flooding is not generally covered by homeowners insurance.
Get the disaster coverage you need today
To make certain you have the necessary insurance coverage to protect your home and belongings from natural disasters, consult with us as your Personal Family Lawyer®. We’ll help evaluate the specific risks for your area, assess the value of your assets, and support you to determine the optimal levels of insurance you should have in place.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.