Does homeowner's insurance cover natural disasters?
Not necessarily, because the differing nature of these perils is treated differently by the insurance industry. Consumers are often confused about what their homeowners' policy covers and what it doesn't. The following guide shows what coverage is available for specific types of disasters and how you get it:
Floods. Flooding can come from many sources--rivers, lakes, the ocean, and so on. In some states, sinkholes are a big issue. Homeowner's policies absolutely exclude damage from flooding, except for a narrow range of cases such as a pipe or a water tank bursting. You can't get an endorsement to cover it at any price; however, if your community is in a flood-prone area, you can probably buy a special policy as part of the National Flood Insurance Program, administered by private insurers and backed by the federal government. Any insurance agent can sell flood policies. The cost depends on what measures your community has taken to reduce the risk of flood damage. Until your community meets the standards of the federal flood-control program, only limited coverage is available: up to $35,000 for a single-family house and $10,000 for its contents, for a cost of about $250 per year. Once the community meets the standards, you can get up to $185,000 for a single-family house and $60,000 for its contents. The premiums depend on the structure of the house and how close it is to the water, but in a moderately flood-prone area, $60,000 of coverage on a house and its contents might cost about $150.
Earthquakes. The state of California requires insurance carriers to offer earthquake coverage to anyone in the state who carries one of their homeowner's policies. Usually it's an endorsement to the regular policy, expanding the coverage for a fee. But if a California policyholder decides not to buy or renew the endorsement, the carrier isn't obligated to give him or her a second chance. Of course, given the risk, earthquake endorsements in that part of the country don't come cheap. The annual premium on a $100,000 house could be anywhere from $150 to $1,200, depending on the location of the house and the materials used in its construction. Brick houses, for example, would be at the high end of the spectrum. Deductibles on earthquake endorsements are usually 10 percent of the coverage for the structure and its contents, figured separately. In other parts of the country, you can get earthquake endorsements, often for next to nothing--but most people don't because they don't expect to need them.
Tornadoes and hurricanes. Although standard homeowner's policies cover windstorms, you may need extra protection if you live in an area such as Florida or Texas that is especially prone to hurricanes or tornadoes. In these areas, standard coverage may not be available; you have to buy a special policy, such as the beach and windstorm insurance plans available in seven Atlantic and Gulf Coast states. As with flood insurance, any licensed agent or broker in those states can sell it.
Volcanoes. Volcanoes are specifically listed as a covered peril in standard homeowner's policies.
Copyright © 2004 American Bar Association
