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Your homeowners insurance may exclude natural disasters: Make sure your home is covered

Most homeowners policies don't cover damage from earthquakes or floods. Make sure you're protected.

Twenty/20

There are certain things you buy but hope to never use. If that fire extinguisher and toilet plunger sit in your house gathering dust for years, great! But if disaster strikes, you have peace of mind knowing they're there.

If you own a house, you may think your homeowner's policy falls into this category. After all, this type of insurance generally covers damage to your home, loss or theft of your stuff, and any liability you might face if someone is injured on your property.

But if your home and belongings are damaged by an earthquake or flood, your policy might do you about as much good as that plunger. Traditional policies specifically exclude such perils.

If you assumed you'd be covered under these scenarios, you're not alone. In a recent survey from online insurance marketplace Policygenius, more than half of homeowners (53%) didn't realize floods aren't covered under typical homeowners policies, and 82% thought they'd be covered for earthquakes.

Review your insurance policies, and depending on where you live, consider adding some coverage you hope to not ever use.

Protect yourself from flooding

If your house is hit hard by a storm, you'll likely be covered for damage from wind or hail, says Loretta Worters of the Insurance Information Institute. But not all water damage is handled equally. "What we might call top-down flooding — from a leaky roof or a busted pipe? You're covered for that," she says. "But water that comes from the ground up isn't covered under a standard policy."

If you're worried your home might flood and you want insurance coverage, you'll need to purchase separate flood policy, either through the government-sponsored National Flood Insurance Program or from a private insurer. Premiums for flood policies average about $58 per month, according to FEMA, but can vary widely depending on where you live and your home's elevation.

That may seem like a hefty price tag, but if your home does flood, the policy can be valuable: In 2019, the average residential flood claim paid by the NFIP was $52,000. Just an inch of water can do more than $10,000 of damage in a 1,000 square foot property, according to FEMA.

What we might call top-down flooding — from a leaky roof or a busted pipe? You're covered for that. But water that comes from the ground up isn't covered under a standard policy.
Loretta Worters
Vice president of media relations, Insurance Information Institute

Policies offered through the NFIP will often be among the cheapest, but they come with limitations. If your property has a basement apartment, it won't be covered, says Worters. "They'll only cover flooding in a basement if it has things like a hot water heater and a furnace — things they feel should be in a basement," she says.

And NFIP policies may not come with the coverage you need. For residential properties, the program will cover up to $250,000 in damage to the building and up to $100,000 for its contents, which may not be sufficient to cover the replacement cost of your house and stuff. In cases where NFIP would provide insufficient coverage, shop for a flood policy offered by a private insurer. You can find more information on NFIP policies along with a list of private insurers in your area at FloodSmart.gov.

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Why you might need earthquake coverage

Earthquakes aren't nearly as common or widespread as floods. Between 1996 and 2019, 99% of U.S. counties experienced a flooding event, per FEMA. But figuring out whether you need earthquake coverage can be a little more intuitive, says Fabio Faschi, property and casualty operations manager at Policygenius. "It doesn't take a property expert to know that there's a higher risk for earthquakes in California," he says.

Homes in certain parts of Alaska, Hawaii, Oregon, Nevada, and Washington are also at particularly high risk, according to Policygenius.

The cost for earthquake insurance will vary depending on the construction of your home (brick homes tend to fare poorly during earthquakes, for example) and proximity to a fault line. Most policies in California are provided by the California Earthquake Authority, whose website shows the likelihood that your area will experience an earthquake by 2044, as well as your proximity to an active fault. The site also provides a premium calculator, but in general, Californians can expect to pay $500 to $1,000 in annual premiums for every $100,000 of coverage. Deductibles (what you pay out of pocket before your coverage kicks in) can run anywhere from 5% to 25% of the total insured value of your home.

If you live in an area where potential damage to your home from an earthquake is worth the cost of the insurance, head to your state insurance department website for a list of carriers that offer earthquake coverage, and shop policies. "Don't just buy insurance based on price. It's very important to be aware of the coverages, including the exclusions, that exist on an insurance policy," says Derek Ross, president of Kulchin Ross Insurance Services in Tarzana, California. Ask any licensed insurance broker you speak with to walk you through the fine print of any coverage you're considering purchasing, he says.

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Do I need disaster coverage if I rent?

If you rent your home, damages to the house caused by a natural disaster aren't your problem — those are likely covered under your landlord's policy. But damage to your stuff very much is your problem, and damage caused by floods and earthquakes likely isn't covered by your renter's policy.

To determine if getting a policy is worth it, weigh the value of your stuff against the cost of coverage. Like homeowner's policies, flood policies depend on where you live and the condition of your dwelling.

Prices for contents-only flood insurance range from $150 to $900 a year. Premiums for earthquake coverage can range as high as $800 to $3,000 per year, depending on the state of your home and the likelihood of earthquake damage. If you're a renter interested in bolstering your coverage, compare standalone policies and explore adding riders or endorsements to your existing renter's policy, to see what level and price of coverage is right for you.              

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