Does Your Home Insurance Cover Natural Disasters? How to Pick the Right Coverage

natural disasters

Choosing among various types of insurance coverage can be a bit confusing, especially when it comes to deciding how to cover your home, cars and personal belongings in the event of a natural disaster.

For instance, did you know if you have a standard home insurance policy, it won’t cover floods, might cover hurricanes and will cover a tornado? It’s just so hard to tell what you need at times. To clear this matter up, let’s look at various types of insurance and how natural disasters are covered.

Many Uninsured Homeowners Don’t Understand Coverage Options

Recently, J.D. Powers surveyed 9,100 homeowners insurance policyholders to determined how many had enough coverage to rebuild their homes after Hurricane Irene struck their neighborhoods. The survey revealed 16 percent of homeowners were underinsured to rebuild after a disaster.

The main reason why many of the homeowners did not have enough coverage to rebuild is because they did not fully understand how their coverage worked, especially in terms selecting the correct value to insure.

While it’s common to insure a home based on a professional assessment, experts say this amount usually will not provide enough money to rebuild, especially with home values lowering as they have in recent years. Rebuilding a home could add up to as much as 30 percent of the purchase price, including demolition, removal of debris and landscaping cost.

Another reason is because they simply don’t understand enough about the various types of policies available and what roles they play in covering their property and belongings. There are numerous policy types to choose from, which could easily confuse even the savviest policyholder.

Common Coverage Options for Natural Disasters

If you want to make sure you have enough insurance coverage to rebuild a home and recover most of your property after a natural disaster, here’s a list of policy options you may need:

1. Standard Home Insurance

Homeowners insurance is the first insurance policy a homeowner should purchase. This coverage is mandatory if the homeowner has financed their home. Even if your home isn’t financed, it should be purchased to avoid the overwhelming out-of-pocket expenses that can add up after a natural disaster.

A basic home insurance policy will cover:

  • Damage to your structure (including attachments to the house like a garage)
  • Your lawn and landscaping
  • Vacant land that you own
  • Your family’s possessions (this includes items that you’ve borrowed but are keeping in the house)

If you want to make sure you’re fully compensated for expensive items like jewelry or antiques, you may need to purchase additional riders.

A standard homeowners insurance policy will only apply under certain circumstances. Policies don’t cover damage from floods or earthquakes. Tornado and hurricane damage is covered if wind damage is solely involved, but if floods occur from hurricanes, you may need different coverage.

2. Flood Insurance

Flood insurance is unique in the world of insurance because, while it is offered through provide insurance companies, each policy is backed by the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Agency (FEMA).

Some homeowners are required to purchase flood insurance because they live in neighborhoods that are considered high-risk for flooding. Homeowners who don’t live in these areas are still encouraged to purchase coverage to ensure their homes are financially protected from flood waters.

Currently, no other type of policy will protect against floods, whether caused by hurricanes, flash floods, mudslides or typical thunderstorms.

3. Hurricane Insurance

Hurricane insurance is a unique category of coverage because it doesn’t exactly exist. Coverage may be purchased as a special hurricane-related deductible or rider under your standard homeowners policy, depending on your insurance company.

You may also purchase two separate policies, homeowners insurance and flood insurance, to meet your needs. To find out what will work best for you, speak with your insurer to learn about the options available.

4. Earthquake Insurance

Like floods, earthquakes are not covered under standard homeowners policies. So if you live in an earthquake-prone area, you might consider purchasing an earthquake insurance policy.

While these policies tend to vary from insurer to insurer, they may cover property damage caused by an earthquake, personal items lost or damaged and even pay for temporary housing, storage, furniture rentals, laundry assistance and more while your home is being repaired.

5. Fire Insurance

Fire insurance policies are available to purchase as standalone policies or as a rider for standard home insurance policies. In general, a home insurance policy will cover damage caused by accidental fires or lightning strikes. However, special fire insurance is needed if  you want to ensure repairs are covered, temporary housing is paid for and clean-up assistance is provided. The best way to find out is to connect with your insurance provider.

6. Auto Insurance

Most drivers carry liability insurance in case they are in a collision with another driver. However, if a natural disaster strikes your area and your vehicle is damaged, in many cases, your home insurance policy won’t cover it.

If you want to make sure that damage to your car is covered in the event of a hurricane, tornado, flood or any other natural disaster, you will need to add comprehensive coverage to your auto policy, which pays for any damage caused to the car while it’s not being driven.

The good news is that there is a type of insurance policy to cover just about any piece of property you own that could be damaged by any type of natural disaster. Your job is to communicate with your insurance agent and decide which of the above policy type combinations would be best for your family, home and other personal property.