Unfortunately, homeowners insurance does not cover every possible cause of damage to your property and what's inside it.
Depending on your location, there are a variety of natural disasters you will need to protect your home against with a supplemental policy.
In this article, we cover the most common types of property insurance for natural disasters (and how to determine which ones you need).
Most homeowners insurance policies do not cover damage caused by flooding. If you live in a flood plain or area prone to flooding, you may be required by your lender to purchase flood insurance.
The National Flood Insurance Program (NFIP) is administered by the Federal Emergency Management Agency (FEMA). Homeowners can purchase NFIP policies through thousands of insurance agents nationwide. Agents who offer homeowners and renters insurance often sell flood insurance.
One thing to note is that NFIP policies can only be purchased for properties within communities that participate in the NFIP. You can find out if your community participates by going to FEMA’s online Community Status Book.
There are two main types of flood insurance. One is a policy that covers the building/structure. The second is one that covers the contents contained in the property. If you own a home, you will need both types to be covered for damage to your home and your personal belongings.
Your flood insurance premium will be based on:
- The amount of coverage you need.
- Your policy deductible.
- The age and size of the building being insured.
- The contents of the insured property.
- The flood risk.
- The location of the lowest floor in relation to Base Flood Elevation on a flood map.
Flood insurance policies do not cover:
- Damage caused by sewer backups unless the backup was caused by flooding.
- Damage caused by moisture, mildew or mold that could have been avoided by the property owner.
- Damage caused by earth movement, even if the earth movement is caused by flooding.
- Temporary housing if your permanent home is damaged.
- Financial losses caused by business interruption.
- Property and belongings outside the flooded building, including decks and patios.
- Damage to vehicles.
There is typically a 30-day waiting period to obtain flood insurance. One exception is if you’re getting coverage due to obtaining, increasing, extending or renewing your mortgage loan. In those cases, there is no waiting period.
Damage caused by earthquakes is another property loss not typically covered by standard homeowners policies.
Earthquakes can occur in all 50 states. According to the United States Geological Survey, nearly half of Americans are at risk for earthquake damage. Even small earthquakes can cause considerable damage to a home. Yet only about 25 percent of homeowners in earthquake prone areas have this type of coverage.
Earthquake coverage is sold primarily through direct and surplus lines insurers. It can be sold as add-on coverage to a regular homeowners policy, or as stand-alone coverage.
Earthquake insurance typically covers:
- Repairs to buildings damaged by an earthquake.
- Personal property lost or damaged due to an earthquake.
- Debris removal.
- Living expenses while your home is being rebuilt or repaired.
Policies typically do not cover:
- Fire damage, even if it was related to an earthquake, such as a ruptured gas line.
- Damage to land, such as sinkholes and erosion.
- Damage that existed before an earthquake.
- External water damage.
- Masonry veneer.
Earthquake policies typically have coverage limits. In addition, there is usually a deductible equal to 10 to 20 percent of the coverage limit.
Premiums for earthquake insurance will be based mostly on:
- Your home’s location relative to earthquake risk.
- The age of your home.
- The construction of your home.
- The cost to rebuild your home.
- Your deductible.
Whether a homeowners insurance policy will protect you from hurricane damage depends on where you live and the kind of damage caused.
Most standard policies cover damage caused by high winds, including tornados and hurricanes. However, residents of high-risk coastal states may not be covered against wind damage through their standard homeowners policy. If you live in one of these areas, you may have to buy separate hurricane windstorm insurance. This type of policy can be bought through an insurance company or state-run insurance pool. Some companies also provide it as a rider on homeowners policies.
In other cases, you may have to pay a separate deductible for damage caused by hurricane winds. Deductibles for hurricane coverage range from 1 percent to 5 percent of the property’s insured value.
If a hurricane causes flood damage, the only coverage for damage is a flood insurance policy.
Coverage for landslides, mudslides, mudflows and sinkholes
Anytime the ground moves underneath your house, it will cause significant damage. Landslides, mudslides, mudflows and sinkholes are not typically covered by standard homeowners insurance policies.
Landslides and mudslides may be covered by some earthquake policies. Mudflows may be covered by flood insurance. Sinkholes are uncommon and any coverage available will be in a separate policy.
Another option for these types of events is a Difference in Conditions (DIC) insurance policy. DIC insurance provides coverage for disasters not covered by other types of property insurance, such as landslides and mudslides.
DIC insurance is typically insured as a stand-alone policy, but can be added as an endorsement on certain property insurance policies.
Every homeowner needs a homeowners insurance policy. Plain and simple. But depending on where you live, you may need to purchase supplemental coverage in the form of:
- Flood insurance.
- Earthquake insurance.
- Hurricane insurance.
- Insurance for landslides, mudslides, mudflows and sinkholes.
Sure, paying for it now may seem like a burden. However, it pales in comparison to the financial turmoil you would experience trying to rebuild after a natural disaster without it.