Is Your Home Insured for a Natural Disaster?

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Natural disasters can happen anywhere, at any time. In 2021, there were 20 natural disasters that each caused over $1 billion in damage in the United States alone. That means that if you live in the U.S., there's a good chance your home has been or will be affected by a natural disaster at some point. The question is, is your home insured for it?

What is typically covered under your homeowners insurance policy?

Most homeowners insurance policies cover damage caused by fires, storms, and wind. But what about floods and earthquakes? Those are usually not covered by standard homeowners insurance policies and need to be purchased separately.

For homeowners living in areas prone to earthquakes, it's important to make sure their homes are properly insured. The same goes for floods. Just because you don't live near a body of water doesn't mean your home can't be damaged by a flood.

Most common insurance losses by cause

According to the Insurance Information Institute, these are the most common causes of loss for homeowners insurance from 2020 (percentage of losses incurred):

  • Wind and hail: 45.5%
  • Fire and lightning: 23.8%
  • Water damage and freezing: 19.9%

The "wind and hail" category covers hurricanes, tornadoes, and winds. Claims under this category made up 45.5% of all claims in the U.S., the largest percentage in the country. The second-highest category is property damage from fire and lightning claims. They have an average cost of $77,340 per claim, the highest dollar figure of all claims. They represent 23.8% of all claims.

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Typical policies cover fire damage to the home itself, detached structures (like sheds or detached garages), and personal property in the home. Some policies cover only a percentage of personal property losses, so it is important to have an accurate inventory of all belongings.

Flooding is not covered by a standard policy

Water damage and freezing is the third highest claim in the U.S. This can be caused by frozen pipes that burst to floods from torrential rains. Anywhere it rains, it can flood. And unfortunately, flooding is one of the most common natural disasters in the U.S.

A standard homeowners insurance policy doesn't cover floods. Homeowners living in designated flood zones or in areas with a high likelihood of flooding will need to purchase an additional flood policy on top of their standard one. The government provides flood insurance run by the Federal Emergency Management Agency (FEMA), which is sold through private insurance companies.

Double check your policy

If you're not sure whether or not your home is covered in the event of a natural disaster, the best thing to do is check with your insurance company. It will be able to tell you what is and isn't covered under your policy. Every region is known for a different set of natural disasters.

There are some steps you can take to help protect your home from damage in the event of a natural disaster. You can make sure your home is properly earthquake-proofed or install a sump pump in your basement to help prevent water damage. However, these precautions cannot completely eliminate the risk of damage. That's why it's so important to make sure your home is properly insured.

Standard homeowners insurance policies usually cover damage caused by fires, storms, and wind, but not floods or earthquakes. Homeowners that live in areas prone to either of those natural disasters should consider purchasing separate flood or earthquake insurance. If you're not sure if your home is properly insured for a natural disaster, the best thing to do is talk to your insurance agent. They can help you understand what your policy covers and make sure you have the right coverage for your needs.

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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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