Natural Disaster Insurance: What Does It Cover?

Natural disaster insurance is not a policy that can be purchased. Your homeowners insurance, on the other hand, already protects your property from wind and rainstorms, accumulating snow, and fire. Even extreme natural disasters such as tornadoes, wildfires, volcanic eruptions, falling meteorites, and blizzards are covered by your homeowners insurance.

Despite the broad coverage provided by a standard homeowners policy, it is important to remember that your policy does not cover everything. In fact, common natural disasters such as floods and earthquakes are rarely covered by standard policies.

What disasters aren't covered by homeowners insurance?

Your homeowners insurance policy most likely excludes flooding and earth movements. If hail damages your property, you may have limited coverage depending on where you live. If you live in an area that is more vulnerable to natural disasters, there are usually other coverage options available.

Flood damage

Flood damage and mudslides are frequently excluded from home insurance coverage, so you'll need to purchase a flood insurance policy through the National Flood Insurance Program (NFIP) to be protected. The NFIP, a federal program that collects flood damage research in the United States, works with private insurers to provide you with federally-sponsored flood insurance.

Flood insurance typically has a 30-day waiting period. If you live in a flood-prone area, you should consider purchasing a policy before the peak of the flood season to avoid uninsurable damage to your home.

Earthquake and sinkhole damage

Most insurers do not cover damage caused by earth movement. This means that most homeowners insurance policies exclude coverage for mudslides, landslides, sinkholes, and earthquakes. If you live in an area where earthquakes or other destructive earth movements are more likely, you should consider purchasing separate earthquake or sinkhole insurance.

Insurance for mudslides and landslides is available through a limited number of carriers in some states, including California and Washington. If you believe your property is in danger, you may be able to benefit from coverage. However, due to the frequency with which these states experience landslides, these policies can be costly.

Hail damage

Your home insurance policy should cover hail damage. However, if you live in a region prone to hailstorms, such as the Great Plains, this may not be the case. Insurers in these areas may impose higher deductibles for hail damage or limit payments for cosmetic hail damage. This means you may be unable to file a claim if the hail only causes superficial damage rather than structural damage.

Does homeowners insurance cover tornado damage?

Tornadoes are frequently covered by standard homeowner policies. Wind damage caused by tornadoes cannot be distinguished from that caused by smaller, more common gusts for insurance purposes. Tornado insurance, however, can be more complicated for homeowners who live in more vulnerable areas due to the destructive power of the storms.

In tornado-prone areas, such as Oklahoma or Texas, insurers can charge a separate deductible for wind-related claims rather than an all-perils deductible. A wind deductible may be fixed, but it is more likely to be a percentage of your total property coverage.

Furthermore, homeowners in storm-prone areas should consider whether they have enough tornado insurance to rebuild after a total loss. While homeowners insurance does cover tornadoes, it may only cover the depreciated value of your home and property rather than the full value of your home and property.

Source: NOAA's Storm Events Database

If your homeowners insurance only covers the actual cash value of your home, or its depreciated value, you should consider upgrading to replacement cost coverage. This type of reimbursement structure does not take depreciation into account, and you are more likely to be able to rebuild your home exactly as it was prior to the loss.

Does homeowners insurance cover hurricane damage?

Your homeowners insurance policy most likely covers some hurricane damage. Losses caused by a hurricane's powerful winds, like tornadoes, are covered by the standard HO-3 homeowner policy. Similarly, if hurricane rainwater damages your home, you're probably covered. Assume a hurricane blows open your front door, letting in rain that drenches your belongings. In that case, standard home insurance would apply.

However, flood damage caused by a hurricane is not covered by insurance. If your home was destroyed by a hurricane, your insurance company would first determine whether the destruction was caused by the hurricane's wind or the storm surge. If you live in an area prone to hurricanes, you should consider getting flood insurance through the NFIP to avoid being denied coverage under your standard policy.

Is damage to vehicles covered by homeowners insurance?

Homeowners insurance does not cover repairs to vehicles damaged on your property as a result of natural disasters. If your vehicle requires repairs, your car insurance must provide compensation to cover the costs.

Assume your car is parked in your garage. Assume that the garage is destroyed by a wildfire or a tornado. Even if the natural disaster occurred while your car was inside your garage, you would be unable to file a homeowners insurance claim to repair or replace it.

How do insurance companies pay for natural disasters?

Following a natural disaster, the amount of compensation you will receive is determined by the type of coverage you have purchased. The dwelling coverage of a policy is available in three varieties: actual cash value, replacement cost value, and extended or guaranteed value.

Assume your home is destroyed by a natural disaster and you have a policy that provides replacement value coverage. If your claim was successful, your insurer would account for the depreciation of your home and deduct that amount from your final compensation. A replacement value policy, on the other hand, does not account for depreciation and only pays up to the limit of your insurance policy.

You must purchase extended replacement value to ensure you are compensated for the full value of your home. This type of coverage ensures that if unexpected costs arise during the reconstruction process and exceed your policy's limit, you will still be compensated.