Does Homeowner's Insurance Cover Natural Disasters?
An important consideration when buying a home or reviewing your homeowners' insurance policy is whether your insurance covers natural disasters, such as hurricanes or earthquakes. While standard homeowners' insurance policies may cover a wide variety of situations likely to be very expensive to fix out-of-pocket, such as items lost to theft or fire damage, not all so-called "acts of God" are covered.
Generally, natural disasters are not covered by a basic home insurance policy if you live in a high risk area, such as a flood plain or along an active fault. Typically, homeowners may purchase supplemental policies that cover a specific type of natural disaster. But if you live in a high-risk area for wildfires, for instance, you may have to pay more for your general policy to cover the increased risk.
This article offers a primer on how natural disasters are covered by homeowners' insurance. See also FindLaw's Insuring Your Home, including What Does a Home Insurance Policy Cover? for related information.
Not all sources of flooding are treated in the same way, since flooding can come from rivers, coastal surges, sinkholes, and even plumbing failures. For the most part, all homeowner policies specifically exclude flood-related damage, except for cases related to flooding from damaged plumbing infrastructure, like leaking pipes.
But if you live in an area where floods are common, you may purchase a special flood protection policy. The National Flood Insurance Program (NFIP), created by Congress in 1968, allows homeowners in flood-prone areas to purchase flood insurance through private insurance backed by the U.S. government. The cost of flood insurance through NFIP is determined by what measures your community has taken to mitigate the risk of flood damage.
See the Federal Emergency Management Administration (FEMA) document National Flood Insurance Program Summary of Coverage [PDF] to learn more.
Storm Coverage: Hurricanes and Tornadoes
Even though homeowners' insurance covers natural disasters related to wind damage, they do not cover the flooding that often follows storm surges from hurricanes. Damage from tornadoes typically is covered, since it usually is considered wind damage (even water damage is covered if, for example, rain comes through a tornado-damaged roof).
If you live in any of the Atlantic or Gulf Coast states susceptible to hurricanes (including Florida and Louisiana), you may need to purchase flood insurance and/or special "beach and windstorm" insurance to protect your home.
Since insurance companies are in the business of making money, and since hurricanes can cost a region tens of billions of dollars in property damage, make sure you understand the fine print if your home is in a high-risk area. Many hurricane-related insurance claims involve disputes over how the terms "wind damage" and "flood damage" are defined by insurers.
The cost of earthquake insurance is determined by several different factors. In addition to the location of the house, insurers also consider the materials used in its construction; the way it is constructed; the integrity of its foundation; the number of stories; the home's insured value; and the policyholder's chosen level of coverage.
Homeowners in areas of country not known for seismic activity often still have the option of purchasing supplemental earthquake insurance, often at a relatively low premium. For example, earthquake insurance is very inexpensive for Missouri homeowners, even though the state sits on the little-known but potentially devastating New Madrid Fault.
Even if you live in Kansas, your homeowners' insurance policy probably covers damage from an unlikely volcanic eruption. Specifically, standard policies cover damage related to ash, dust, particle matter, lava flow, and the initial removal of these materials. Landslides, shock waves, tremors, ash deposited later (such as from the wind) are not covered by most policies.
Homeowners living near active volcanoes, including parts of Washington, may purchase additional coverage for volcanic disasters.