Your homeowner’s or renter’s insurance policy covers you for a lot of things (see 6 Reasons You Need Renter's Insurance). But what about natural disasters? Earthquakes? Floods? Hurricanes? Will you be covered if your property is hit by one of these?
In this article, we look at what is covered in basic policies, what isn't, and what additional coverage you can purchase to get the protection you want.
What Is (Usually) Covered
As with all insurance policies, you need to read yours to understand what is covered. Consult the section of the policy called "named perils," which will likely inform you that your policy covers damage caused by the following:
- Fire or lightning
- Windstorm or hail
- Vandalism and malicious mischief
- Falling object
- Weight of ice, snow, or sleet
- Accidental overflow of water or steam or bulging, cracking, or tearing from an automatic fire sprinkler system, air conditioning system, heating system, or appliance
- Freezing of air conditioning, heating, plumbing, appliance, or automatic fire sprinkler system
- Accidental damage from artificially generated power surge
With respect to these perils, there is essentially no difference between a renter's and homeowner's policy. The only difference is that with the renter’s policy only your personal property is covered, not the structure you're living in.
What Is (Usually) Excluded?
Damage caused by the following is usually not covered (is excluded from coverage):
- Other earth movement, including sink holes and landslides
- Floods, including mudflow
- Other water damage
- Nuclear war or nuclear accident
Policies vary from company to company and from state to state, so make sure you know exactly how they interpret each of these items.
Compare the water damage exclusion with the list of what is covered under named perils carefully. Typically, you won't be covered if you have back-ups or overflow from your septic system or sump-pump.
Policies also vary when it comes to hurricanes. If you live in a hurricane-prone area, make sure you understand whether you will be covered in the event that one strikes.
Extending Basic Coverage
If you want coverage for the excluded perils, can you get it? In many cases the answer is yes. But let's look at some of the details.
If you live in an area that is not earthquake prone, you can easily and inexpensively buy coverage, but do you really need it?
Curiously, in Missouri and some of the other states along the earthquake-prone New Madrid Fault line, earthquake insurance is not so expensive, and is therefore highly recommended.
In California, Oregon, Washington, Alaska, and Hawaii, earthquake insurance tends to be pricier and often comes with a high deductible. In California, insurers must offer coverage, but getting it will require some effort on your part: you might be required to prove, through an inspection, that your structure is bolted to its foundation and that certain fixtures, like hot-water heaters, are strapped to walls. Whether you want coverage in these five states will depend to a significant extent on your budget and how much you have to lose.
Sinkholes are most common in Alabama, Florida, Missouri, and Tennessee.
In Florida, coverage for damage caused by sinkholes is often included in policies, but double check to be sure.
In Tennessee, coverage must be offered, but you pay extra. In addition to weighing the price, read up on the issue to find out how common sinkholes are in the area where you live before making any decision.
Mudslides and Landslides
Coverage for this can be expensive and in some cases impossible to buy, especially if you live in an area that is prone to such slides.
If you reside in a high-risk area and you obtain your mortgage from a federally regulated or insured lender, you are required to buy flood insurance through the National Flood Insurance Program (NFIP). If you live in a moderate- or low-risk area, the government won’t force you to buy it, but you can if your community participates in the NFIP.
Note that flooding is the most common natural disaster in America, so if you live anywhere other than the top of a mountain, you might consider looking into it.
Other Water Damage
Coverage is generally available at reasonable cost. It’s at least worth pricing and considering.
Coverage is generally available but often subject to significant deductibles.
Be aware that if you suffer flood damage that results from a hurricane, your hurricane coverage will not cover the flood damage. For that reason, separate flood coverage is highly recommended in hurricane-prone areas.
Coverage for damage caused by tornadoes is usually covered in a basic policy under the "windstorm" peril. However, if you live in tornado alley, or close to it, don't take it for granted: make sure that your policy doesn't exclude it.
Discuss With Your Agent
In addition to reading the policy yourself, always talk to your agent about what is covered, what isn’t, and how you might want to extend coverage (if you don't have one, consult our 5 Questions to Ask Before Choosing an Insurance Agent). Your agent is your local expert.