We’ve been hearing about a lot of natural disasters around the country lately, which are fairly common during the summer months and even year-round. No one ever thinks they’ll be impacted by a natural disaster, but it does happen. Unfortunately, if you aren’t prepared, you might be facing a lack of insurance coverage to repair or rebuild your home.
Your homeowners' insurance is something that can, in some cases, protect you against extreme natural disasters, but not always. Knowing what your coverage excludes is important.
What Doesn’t Homeowners’ Insurance Cover?
While every policy and company can be different, it’s likely that your homeowners' insurance excludes flooding and earth movements. Depending on where your home is, you might also have limited coverage for hail damage.
Flood damage and mudflows are very often excluded from homeowners insurance. That means you need to go through the National Flood Insurance Program (NFIP) to get a flood insurance policy. This is a federal program that researches flood damage in the U.S. and then works with private insurance to provide flood insurance that’s federally sponsored. There’s typically a 30-day waiting period for flood insurance, so you should think about buying a policy before the peak of flood season.
Most homeowners policies don’t include damage from earthquakes or sinkholes either. You might see these exclusions referred to as damage caused by the movement of the earth. It can also include landslides and mudslides.
Depending on where you live, you could need separate sinkhole or earthquake insurance. Some states have insurance for landslides and mudslides, particularly on the west coast. The policies can be expensive, though.
Your home insurance policy probably protects you against hail damage unless you live somewhere hail storms are especially prevalent, like the Great Plains states. In these places, you might have a higher deductible for hail damage, or the insurance company could restrict payments for hail-induced cosmetic damage. You might be unable to file a claim unless the hail causes structural damage.
What About Tornadoes?
Spring and summer are a time when we tend to see a fair amount of tornadoes, but luckily, most standard homeowners insurance policies do cover damage from these storms. For the purposes of insurance, wind damage stemming from tornadoes isn’t distinct from the damage that comes from smaller gusts. If you live somewhere that’s especially vulnerable to tornadoes, insurance might get a bit trickier.
For example, in Oklahoma or Texas, insurance companies can charge separate deductibles for claims related to wind instead of the all-perils deductible. Wind deductibles may be a flat amount, but more commonly, it’s a percentage of your total property coverage.
If you live somewhere prone to tornadoes and strong storms, you might consider whether you have enough coverage to allow you to rebuild if you suffer a complete loss. For example, your homeowners' insurance may cover tornadoes but only the depreciated value of your home and property, as compared to the full value.
If you have homeowners insurance that only covers the depreciated value or actual cash value of your home, you might think about upgrading to replacement cost coverage. This is a reimbursement structure that doesn’t take into account depreciation, so it may facilitate you being able to rebuild your home back to the way it was before your loss.
Are Hurricanes Covered?
Your homeowners' insurance may partially cover hurricane damage, but flood damage from a hurricane is almost always excluded. If a hurricane destroys your house, your insurance company determines if the destruction was from the wind or due to a storm surge before they compensate you. If you live somewhere that gets a lot of hurricanes, you should think seriously about getting flood insurance.
Once you experience a natural disaster, the compensation you get from the insurance company depends on your coverage. Your dwelling coverage comes in three types. There’s actual cash value, replacement cost value, and extended or guaranteed value.
Finally, if you want to make sure you receive compensation for your home’s full value, you need to purchase extended replacement value. This coverage makes sure that if something comes up in rebuilding your home and it exceeds your policy limit, you’re still compensated.