Although home insurance policies cover a large number of potential risks, natural disasters are a grey area. Most standard home insurance policies cover damage caused by certain disasters, including fire, windstorm, hail, lightning and other types of storms, but damage caused by natural disasters such as floods, earthquakes, hurricanes and mudslides is generally not covered by standard policies. In high risk areas, you might have to buy additional coverage if your home is at risk of being damaged by these events.
It is also the most common type of coverage exclusion. Houses located in areas prone to flooding, especially those near waterways, should be covered under a separate flood insurance policy. In the United States, the National Flood Insurance Program (NFIP) issues policies that offer flood coverage. Without this, homeowners would be on the hook to pay for damages to their homes due to floods out of their own pockets, which could be financially catastrophic. Although flood-related home damage is typically excluded in most policies, it’s important to know if your home is located in a flood zone and how much coverage you need. Floods can cause more damage than many people realise, even relatively minor ones.
In a similar vein, homes in earthquake zones need to have earthquake insurance, which is not covered by a standard policy. You can typically add it on to your existing policy, or you can buy it as a stand-alone policy, depending on your insurer. Earthquake endorsements will cover building structure, personal property, and additional living expenses if you are displaced, but generally have higher deductibles than other coverages.
If you live in an area that’s prone to hurricanes, for example, your homeowners policy might cover damage due to wind, but not damage due to storm surges that cause flooding. Therefore, a coastal homeowner should carry both standard homeowners insurance and flood insurance to ensure that they’re fully covered. Other policies with deductibles might have special windstorm deductibles that are higher in hurricane-prone areas.
Knowing the specific risks in your region and what your home insurance policy covers or doesn’t cover is key to having the appropriate protection. An experienced insurance agent can help you customise the policy to fit your needs and prevent financial surprises in the aftermath of a natural disaster.
