What is natural disaster insurance, and how does it work?
Your homeowners insurance policy doesn’t cover every mishap that could possibly befall your house, its contents, or its occupants.
The nearby creek jumping its banks and sending 6 inches of muddy water through your front door? Nope. A freak earthquake cracking your foundation slab beyond repair? Not a chance. A long-simmering sewer clog finally backing up and trashing your finished basement? LOL!
Fortunately, you can get insurance to cover these potentially costly perils — and plenty of others too. You just need to look for specialized types of property insurance that fall under the broad banner of natural disaster or catastrophe insurance.
What Is Natural Disaster Insurance?
Natural disaster insurance describes any type of property insurance policy that covers incidents standard homeowners insurance doesn’t. Because some of these perils are human-caused or not strictly natural, some insurers and insurance agents refer to these types of policies as “catastrophe insurance.”
The most common types of natural disaster insurance policies cover floods, earthquakes, and sewer backups.
If you live in an area where certain types of destructive events are common, your standard homeowners insurance policy might exclude coverage for those events. For example, insurance companies often exclude windstorm damage in hurricane-prone areas and certain types of fire damage in wildfire-prone places.
Natural disaster insurance isn’t a single, all-encompassing insurance policy covering everything standard homeowners insurance doesn’t. It’s a category of insurance policies that goes beyond standard homeowners insurance coverage, usually with regard to a single type of destructive event.
How Does Natural Disaster Insurance Coverage Work?
The typical natural disaster policy has the same features as a standard homeowners insurance policy:
- Coverages. The policy should include clear definitions of the types of events it covers and scenarios excluded from coverage.
- Premium. You must pay a monthly or annual payment to keep the policy in force. It depends on various factors, including the likelihood you’ll file an insurance claim, your coverage amount, and your policy deductible.
- Coverage Limit. The insurer won’t pay more than a maximum dollar value on a single claim.
- Deductible. You must pay a certain amount out of pocket on a claim before insurance coverage kicks in.
Depending on the policy type and circumstances surrounding the claim, a natural disaster insurance policy pays on claims in one of two ways.
- Larger Claims. If it requires lots of rebuilding or repair, the insurer is likely to pay the contractors directly. If you incur significant upfront costs, such as temporary relocation expenses or emergency repairs to make the home livable, the insurer might pay you for those.
- If the claim is smaller or less complicated, or you can do the necessary work on your own, the insurer might cut you a check for the total claim value.
What Does Natural Disaster Insurance Cover?
You can get natural disaster insurance for various potentially costly catastrophes.
Natural disaster insurance generally covers only one type of catastrophe, so you might need more than one policy if you live in a disaster-prone area. The most common types of natural disaster insurance include:
- Floods and Mudflows. Standard homeowners insurance never covers flood damage or damage from mudflows and mudslides. Unlike most other natural disasters, the federal government protects homeowners through the National Flood Insurance Program, which covers both land-based flooding and tsunami damage. Flood insurance premiums can be pricey in high-risk flood zones, however.
- Earthquakes. Earthquake insurance covers damage to dwellings and personal property due to earthquakes, whether it’s the direct result of the shaking or a second-order effect like a tree limb falling on the house. Some private insurers offer earthquake insurance. In California, the California Earthquake Authority offers state-guaranteed coverage. Like flood insurance, earthquake insurance can be expensive near active faults.
- Windstorms and Tornadoes. Standard homeowners insurance usually covers “regular” wind damage. However, it doesn’t always cover damage from hurricanes or tornadoes, particularly in geographic areas where those events are common.
- Volcanic Eruptions. Believe it or not, standard homeowners insurance often covers volcanic eruptions as well, but usually not for those who need it most. If you live in the shadow of an active volcano, you’ll likely need a supplemental insurance policy.
- Earth Movement. Earthquake insurance doesn’t cover all types of earth movement, including landslides and debris flows unrelated to earthquakes or volcanic eruptions. You may need a difference in conditions policy, which covers a range of less common perils.
- Sewer Backup. Sewer backup often occurs due to localized conditions, like tree roots blocking the outflow pipe. But sometimes, it’s the result of a more widespread disaster, such as a deluge that overwhelms a city’s storm sewer system. Neither homeowners insurance nor flood insurance covers this type of disaster. You need a separate policy.
What Disasters Does Standard Homeowners Insurance Policy Cover?
The details of homeowners insurance coverage vary from one policy to the next.
One of the most important variables is the policy classification. The most common classifications for policies written on single-family homes are:
- HO-1. This basic homeowners insurance policy only protects the dwelling (primary structure and possibly outbuildings) and personal possessions from specific named incidents. Those usually include wind, hail, lightning, fire and smoke, explosion, vandalism and civil unrest, vehicle and aircraft crashes, and volcanic eruptions.
- HO-2. This more comprehensive type of policy also covers damage from falling objects like trees; roof collapses due to ice and snow; and damage from mechanical, plumbing, or electrical mishaps.
- HO-3. The most comprehensive type of standard homeowners insurance policy covers all perils except those specifically excluded in the policy — usually floods, mudslides, sinkholes, earth movement, nuclear accidents, and war, but possibly others as well.
- HO-8. This less comprehensive policy type is similar in scope to HO-1, with exclusions for basically anything not specifically named in the policy.
Even within a particular classification, coverage may vary based on where the property is located, both in terms of broad regional geography and its specific setting. For example, policies issued in regions of the U.S. where grass or forest fires are common might specifically exclude fire damage caused by wildland fires.
If your property is damaged in an event not covered by your standard homeowners insurance policy, you need disaster insurance to fall back on.
How to File a Natural Disaster Insurance Claim
Filing a natural disaster insurance claim is a lot like filing a standard property insurance claim. Follow these steps:
- Figure Out Which Policy to File Under. First, figure out whether your standard homeowners insurance covers the damage or you need to file under your disaster insurance policy. If you’re not sure, read through your policies’ coverage sections.
- Contact Your Insurance Agent or Insurance Company to Begin the Process. If you have an insurance agent, they should be able to file the claim on your behalf. If not, your insurance provider should have an online claims portal where you can start your claim, upload documentation, and communicate with your claims adjuster.
- Document the Damage. Take lots of photos of the damage and take stock of any possessions lost or damaged during the disaster. You need these to support your claim.
- Make Emergency Repairs or Find Alternative Living Arrangements. As quickly as possible, make any repairs necessary to make your home safe (and only those repairs). If that isn’t possible, find alternative living arrangements. Keep receipts for any expenses related to these arrangements, as your policy should cover additional living expenses.
- Work With Your Claims Adjuster. Depending on the situation, your insurance company will either send a claims adjuster to visit your property or view the damage remotely using information like the pictures you’ve provided or satellite or drone footage. Answer their questions promptly, and provide any additional information they request.
- Vet and Hire Contractors to Repair or Rebuild. Find licensed contractors to restore your property to its former condition. Depending on the circumstances, your insurer will either pay them directly or reimburse you for out-of-pocket expenses.
Natural Disaster Insurance FAQs
The right natural disaster insurance policy could mean the difference between business as usual and financial ruin following a destructive event. The answers to these questions could help you determine whether that policy makes sense for you and yours.
Do I Need Additional Coverage for Natural Disaster Insurance?
If you want financial protection against property damage or loss due to a type of natural disaster not covered by your standard homeowners insurance policy, then yes.
Depending on where you live, you might not have a choice. Homes in federally designated flood zones must have flood insurance, for example. But if you’re not required by law to carry disaster insurance and you’re willing to accept the risk, you don’t absolutely need it.
How Much Does Natural Disaster Insurance Cost?
It depends on several different factors:
- The type of policy
- The insurer — two insurers might charge different premiums for what’s basically the same policy
- The relative risk to the insurer — that is, the likelihood of the policyholder filing a claim
- The policy’s coverage limits
- The policy deductible
The only way to find out exactly how much you’ll pay for natural disaster insurance is to contact an insurer for a quote. Use an insurance agent or online insurance broker to source multiple quotes quickly and compare offers.
What Catastrophes Are Typically NOT Covered by a Home Insurance Policy?
It depends on the policy’s classification.
HO-1 and HO-8 policies are relatively narrow in scope. They only cover specific named incidents, such as lightning strikes and civil unrest. Events not specifically named in the policy aren’t covered under it.
HO-2 and especially HO-3 policies are broader in scope. HO-3 policies cover all perils except those specifically excluded by the policy. Some of those exclusions are low-probability human-created disasters like war and nuclear fallout, but others are natural events like landslides and flooding.
Does Car Insurance Cover a Natural Disaster?
It depends on the type of coverage you have. If your car insurance policy includes comprehensive coverage, it might cover certain types of natural disaster damage, such as a tree limb falling on the car or water damage tied to a flood.
Insurance is all about managing risk. If your home has a high risk of sustaining damage due to a particular type of natural disaster, it’s only natural you’d consider adding disaster insurance coverage to reduce the out-of-pocket cost.
It makes more sense if that type of natural disaster is one that’s rarely or never covered by standard homeowners insurance, such as earthquake or flood insurance coverage. It also makes more sense — and may be unavoidable — if you live in an area that’s so high-risk that insurers modify homeowners insurance policies to reduce their exposure.