The United States experienced a staggering 97 natural disasters in 2021 alone. Among these, 64 were attributed to severe thunderstorms, while 14 were the result of wildfire outbreaks, heat waves, and drought. Additionally, 12 disasters stemmed from floods and flash floods. This data underscores the increasing frequency and diversity of natural disasters plaguing the nation, emphasizing the urgent need for comprehensive insurance coverage in vulnerable regions.
However, following extreme weather events, many major insurers are now refraining from providing the coverage that homeowners in disaster-prone areas rely on the most. At least five prominent U.S. property insurers, such as Allstate, American Family, Nationwide, Erie Insurance Group, and Berkshire Hathaway, have informed regulators that they are ceasing to offer certain coverages in specific regions due to the effects of climate change-induced extreme weather patterns. This includes excluding protections for various weather events and implementing increases in monthly premiums and deductibles.
Which Disasters Does Homeowners Insurance Cover?
Typically, a standard homeowners insurance policy covers a wide array of disasters, with exceptions specified in the policy. The most comprehensive policies will typically protect against damage caused by:
1. House fires, including kitchen fires
2. Wildfires
3. Ice, snow, and deep freezes
4. Lightning strikes
5. Volcanic eruptions
6. Wind and hailstorms
7. Hurricane wind damage, although this might vary in certain coastal areas
8. Falling objects, such as tree branches
Reviewing the specifics of your homeowner’s insurance coverage is advisable to ensure you’re adequately protected and to avoid any surprises regarding what incidents are eligible for a claim.
What Disasters Aren’t Covered by Homeowners Insurance?
Standard homeowners insurance policies typically do not cover damage resulting from floods and earthquakes. For protection against these events, separate insurance policies specifically tailored for flood and earthquake coverage are necessary in addition to your home insurance policy.
Earthquake Damage
Earthquake insurance can be purchased from private insurance companies in most states, while California residents have the option to buy earthquake insurance from companies affiliated with the California Earthquake Authority. The annual cost of earthquake insurance averages around $850, but this can vary depending on factors such as your home’s characteristics, location, and chosen deductible.
Although home insurance generally excludes coverage for earthquake damage, there is one exception: if an earthquake triggers a fire that causes damage to your home, the fire damage may be covered under your home insurance policy. In such cases, additional living expenses coverage could also help cover temporary relocation costs during repairs.
Flood Damage
Coverage for flood damage is available through the National Flood Insurance Program (NFIP) and private insurance companies. NFIP policies typically offer up to $250,000 for dwelling coverage and $100,000 for personal contents protection. If higher coverage limits are needed, private flood insurance policies can be purchased.
The cost of flood insurance varies based on factors such as flood risk, property characteristics, coverage amount, policy type, and insurer. On average, NFIP flood insurance costs around $859 per year, according to an analysis by Forbes Advisor.
Hurricane Wind Damage
Certain coastal areas, such as coastal Texas, may exclude coverage for wind damage in standard home insurance policies. In such regions, obtaining coverage for windstorms and hail damage may require purchasing a policy endorsement or a separate insurance policy specifically designed to cover these perils.
Alternatively, homeowners in areas where wind damage coverage is limited may have options such as a state’s FAIR (Fair Access to Insurance Requirements Plan) or a Beach plan. FAIR plans provide coverage as a last resort for homeowners facing high risks, while Beach plans are available exclusively in specific coastal communities along the Atlantic and Gulf coasts.
Knowing What Insurance Deductibles Is
An insurance deductible represents the portion subtracted from a claim payment when certain types of insurance claims are filed, such as those for damages to your home.
In homeowners insurance, deductibles are typically specified as a dollar amount, such as $500 or $1,000. For instance, if your policy carries a $1,000 deductible and your home sustains $10,000 in damages, your insurance company would reimburse you $9,000.
Alternatively, deductibles can be defined as a percentage of your home’s insured value. This is often the case with a hurricane deductible, which commonly ranges between 1% and 5%, but can climb as high as 10% in high-risk areas like the Florida coast. For example, if your home is insured for $300,000 and you have a 2% hurricane deductible, your out-of-pocket expense would be $6,000 in the event of a hurricane-related claim.
Notably, only 19 states along with Washington, D.C., permit insurance companies to apply a hurricane deductible. These states include Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, and Virginia.
Similarly, earthquake insurance may feature a percentage-based deductible. This deductible typically ranges from 2% to 20% of your dwelling coverage amount. In states prone to earthquakes, insurance companies may establish a minimum deductible, such as 10%, as outlined by the Insurance Information Institute.
Steps to Take When Facing Damage From a Natural Disaster
1. Reach Out to Your Homeowners Insurance Provider
Promptly contact your insurance agent or company following any damage. If your home becomes uninhabitable, discuss the additional living expenses coverage included in your policy. This coverage, also known as loss of use, assists with expenses like hotel accommodations, meals, and storage. Ensure you retain all receipts for these expenses to facilitate a claim for additional living expenses.
2. Evaluate and Document the Damage
Document the damage to your property and personal belongings by taking photographs. Note the type of damage, estimated value, and approximate purchase dates as you capture images. This documentation will be invaluable when filing an insurance claim. Maintaining a home inventory can further streamline the claims process.
3. Inquire with Your Home Insurance Company
Seek clarification from your insurance provider by asking pertinent questions:
– Can I initiate cleanup efforts?
– Is it advisable to commence repairs?
– Should I obtain repair estimates?
– When is the deadline for filing my claim(s)?
– Which documents are required to complete my claim?
– What is my deductible?
4. Maintain a Home Insurance Claim Journal
Establish a comprehensive record-keeping system for all paperwork related to your home insurance claim. Keep track of receipts, photographs, videos, and communication with your insurance company. Record dates, names, and details of conversations involved in the claims process for easy reference.
5. Review Your Homeowners Insurance Policy
Familiarize yourself with the contents of your home insurance policy, including coverage types and limits. If your policy is not readily accessible, request a copy from your insurance agent or company. Understanding the policy details will clarify the compensation you’re entitled to and your maximum payout.
6. Register for Disaster Assistance
If your home sustains damage from a natural disaster, register for assistance at disasterassistance.gov. Provide essential information, including your home address, current residence details, Social Security number, insurance information, income, description of damage and losses, and banking information for direct fund disbursement. You can also contact FEMA directly at 1-800-621-FEMA (3362) or visit a Disaster Recovery Center (DRC).
Insurance Coverage for Natural Disasters and Seeking Expert Advice
Understanding insurance coverage for natural disasters ensures individuals adequately prepare for unforeseen events and make informed decisions about their financial protection. Knowing what’s covered and what’s not helps homeowners assess risks, avoid potential coverage gaps, and plan for additional protection if necessary.
Seeking assistance from professionals regarding natural disaster insurance coverage is important because it ensures that individuals receive accurate information tailored to their specific needs and circumstances. Professionals like H2O Restoration can guide you on selecting appropriate coverage limits, understanding policy exclusions, and navigating complex insurance terminology, ultimately helping homeowners make informed choices to safeguard their property and financial well-being.
Final Thoughts
As major insurers increasingly withdraw coverage from disaster-prone regions due to climate change-induced extreme weather patterns, it’s imperative for homeowners to possess a comprehensive understanding of their insurance policies. Particularly noteworthy is the significance of grasping insurance deductibles, especially in contexts such as earthquake and hurricane coverage, where deductibles can significantly impact financial outcomes.
This underscores the necessity of taking proactive steps when confronted with damage from a natural disaster, from promptly engaging insurance providers to meticulously documenting all aspects of the claims process.
Ultimately, this serves as a reminder of the paramount importance of preparedness and knowledge in navigating the complexities of insurance coverage and recovery efforts amidst the ever-evolving landscape of natural disasters.
FAQs
What types of natural disasters are typically covered by homeowners insurance?
Homeowners insurance policies typically cover a range of natural disasters, including wildfires, lightning strikes, windstorms, hailstorms, and volcanic eruptions. However, coverage for floods and earthquakes is usually not included and requires separate insurance policies.
Do I need separate insurance for flood and earthquake coverage?
Yes, flood and earthquake coverage are typically not included in standard homeowners insurance policies. To protect against these events, homeowners need to purchase separate flood insurance and earthquake insurance policies.
How much does flood insurance cost?
The cost of flood insurance varies based on factors such as the property’s location, flood risk, coverage amount, and insurance provider. On average, flood insurance from the National Flood Insurance Program (NFIP) costs around $859 per year.
Are hurricanes covered by homeowners insurance?
Homeowners insurance policies typically cover damage from hurricanes, including wind damage and damage from associated perils like rain and hail. However, coverage may vary depending on the policy and location, especially in coastal areas prone to hurricanes.
