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Natural disaster insurance: How to protect your home from hurricanes, wildfires and more

Homeowners insurance often doesn't cover damages from natural disasters, but flood, windstorm and other insurance policies can.

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This story is part of The Cost of Climate Change, CNET's coverage of how the changing climate impacts a range of financial issues.

Climate change is continuing to cause massive destruction across the US and the rest of the world. Bill Gates warns that climate change disasters could become just as deadly as COVID-19. Last year was the fifth warmest year on record and saw 22 events, including record numbers of hurricanes and wildfires, that individually caused over a billion dollars in damages -- making natural disaster insurance coverage more important than ever.

Will the fires and storms calm down moving forward? Don't bet on it. The US Global Change Research Program's fourth report on national climate assessment concludes that climate change is only going to increase the occurrence and severity of billion-dollar disasters. For homeowners, this means taking action now to protect your home, property and investments.

A traditional homeowners insurance policy protects against some damages from natural disasters -- depending on the type of disaster and where you live -- but it  won't protect your home against everything. To mitigate expensive repairs and rebuilding costs, you'll need to purchase additional coverage. 

Make sure you have the right insurance to protect your home

Homeowners insurance is the bare minimum you need to protect your home. If you live in an area that is prone to natural disasters, such as wildfires, hurricanes or earthquakes, supplemental insurance may be needed.

We'll walk you through the most common natural disasters in the US and let you know how to lower your financial risk with the right insurance policies.

Wildfires

According to the Insurance Information Institute, there were 58,950 wildfires across the United States in 2020. We saw 10.1 million acres damaged and six of California's largest wildfires in recorded history. One particular fire in Napa and Sonoma counties caused 2.9 million dollars in damage.

While wildfire damages are often covered by homeowners insurance, providers have recently been canceling policies in high-risk areas such as California. A moratorium on cancelling homeowners insurance policies was put into place in 2019 through the end of 2020. And, with another state of emergency declared in California, another moratorium is forthcoming to prevent homeowners from losing coverage in high-risk zip codes as wildfires continue to rage across the state.

"Due to the Wildfire Catastrophes of 2017, 2018, 2019, 2020 and 2021, Insurance Companies in California have been paying millions of dollars in claims to their policyholders," says Andy Barajs from State Farm. 

"Insurance companies have not had a break and when the claims funds become scarce, they simply cannot afford [to pay] more claims. This is why some insurance companies are looking for any excuse not to renew with policyholders and why many companies are leaving California altogether. In the event of a wildfire, the moratorium puts a temporary stop to this practice and is forcing insurance companies to renew policies and continue to help policyholders that live near wildfire areas."

To ensure your policy is renewed, Barajs recommends not filing small claims if you can help it and speaking with an agent about which actions might get your policy canceled. "You should also investigate which companies are still insuring in your area. This way you'll be better prepared in case your insurance carrier decides not to renew your policy." 

Floods 

Floods cause billions in damages each year, with $20 billion in damages expected this year, according to a New York-based flood research nonprofit, First Street Foundation. And, 40% of all flood claims filed between 2014 and 2018 were from homeowners outside of high-risk flood areas. 

Flood damage is not covered by a standard homeowner's policy. For flood protection, you need to get a separate flood insurance policy through the NFIP -- a federal government sponsored flood insurance program -- or a private insurer. If you get flood insurance through the NFIP, a basic policy comes with $250,000 for the home itself and $100,000 for personal property. Also, there is a 30-day waiting period for every new policy before you can file a claim, which means you need to buy a policy well before you need it. Flood insurance covers damages to the following: 

  • Appliances
  • Cabinetry
  • Carpeting
  • Electric systems within the home
  • Foundation
  • Plumbing systems within the home
  • Staircases
  • Window treatments
  • Personal valuables

However, flood insurance does not protect you against everything related to water damage. This means that the following are not covered by flood insurance:

  • Loss of use
  • Additional living expenses
  • Financial losses caused by business interruptions
  • Moisture, mold or mildew that could have been avoided or is not directly related to the flood
  • Earth movement such as mudslides even if they are caused by a flood
  • Property that is outside of the insured building, which includes decks, septic systems and fences

Flood insurance is required in all areas FEMA has deemed an A zone.  To see if you are in an area prone to flooding, you can enter your address into FEMA's flood map.

"Many clients are in denial that an earthquake, flood or other disaster would impact them," says Clare Schachter (CIC, CPRM, CPRIA), Vice President of Woodruff Sawyer

"As an example, a client [with a] mountain home on a river chose not to purchase flood insurance after one major flood didn't impact them. It was discussed many times, but their decision remained the same. Then several years later, a flash flood caused them to lose their home and there was no coverage. They lost everything." 

Tornadoes

In 2020 there were a total of 1,050 tornadoes that caused a record breaking $36 billion dollars in damages. Though there were well over a thousand tornadoes across the country, almost half of the $36 billion can be attributed to only 14 tornadoes.

Homeowners insurance typically covers damages linked to tornadoes— meaning hail or wind damage. However, if you live in Tornado Alley -- Texas, Iowa, Kansas, Nebraska or Ohio -- you may need to purchase additional coverage called windstorm coverage. 

Windstorm coverage protects your home, belongings and any other structures on your property from damages related to either wind or hail. However, it will not protect you from flood waters, water backups or storm surges.   

Hurricanes

2020 was a big year for hurricanes. 12 hurricanes in total made landfall and collectively did $37 billion in damages. And 2021's hurricane season is already predicted to be above average, with the latest storm, tropical storm Henri causing power outages and flooding across the northeastern US.

While there's no separate policy specifically for hurricane damage, both flood and windstorm insurance can typically provide financial security against hurricanes.  Many standard homeowners policies do offer some protection from  wind damage from hurricanes -- though no coverage is offered against flood waters -- but if you live in an area that is frequently hit with hurricanes, wind coverage may not be a part of your standard homeowners policy.

The top ten states that are routinely hit by hurricanes are:

  • Alabama
  • Florida
  • Georgia
  • Louisiana
  • Massachusetts
  • New York
  • North Carolina
  • Massachusetts
  • South Carolina
  • Texas

If you live in any of these states, strongly consider purchasing both windstorm and flood insurance. 

Earthquakes

Earthquakes are one of the few natural disasters that are not covered in any shape or form by a standard homeowners insurance policy. To be fully protected, you must purchase a separate earthquake policy. 

According to the United States Geological Survey, the states with the most earthquakes each year are:

  • Alaska: Average 1,503 a year
  • Oklahoma: Average 286 a year
  • California: Average 258 a year
  • Nevada: Average 86 a year
  • Wyoming: Average 85 a year
  • Hawaii: Average 34 a year
  • Kansas: Average 18 a year
  • Idaho: Average 16 a year
  • Montana: Average 15 a year
  • Texas: Average 14 a year

Earthquake insurance can be purchased as a separate policy and often covers any damage that is the direct result of an earthquake. It does not cover  indirect damage, such as fire or water damage.

Other Natural Disasters 

Other natural disasters that are less common include volcanoes, tsunamis, mudflows and sinkholes. Most homeowners insurance policies protect against damage done by volcanoes. The same, however, can't be said about sinkholes and tsunamis. 

Flood insurance is needed to protect your home against both tsunami and mudflow damage. Sinkhole protection requires a separate sinkhole endorsement. 

The states with the worst sinkhole problems are currently:

  • Alabama
  • Florida
  • Kentucky
  • Missouri
  • Pennsylvania
  • Tennessee
  • Texas

Each year sinkholes cause around $300 million in damages. If you live in one of the states above, speak with an agent about adding sinkhole coverage. 

How natural disaster insurance works

After a natural disaster strikes, you'll file a claim for any damages incurred. Although you can usually handle this process entirely online, it can be helpful to speak with an agent. Be sure to file a claim as soon as possible after damages occur -- one of the worst things you can do is wait to file a claim. If possible, always file the day or or after a natural disaster. 

Another important thing to do is to take copious amounts of pictures and videos and to refrain from throwing damaged items away until an insurance adjuster comes to your home -- unless, however, it poses a risk to your health. Spoiled clothes, foods or bedding can all be thrown out after they're photographed.

Typically, an adjuster will visit your home between 24 and 48 hours after you file a claim. If many homes in your area were severely affected, it may take longer. 

To expedite the claims process, every homeowner should fill out a home inventory list ahead of time, regardless of where they live. However, if you live in a disaster prone area, this is even more important. Catalogue the condition of high-price possessions regularly -- once a year, if possible -- with photo evidence. You should also store your photos in the cloud in case your storage device is destroyed.  

FAQs

How long before supplemental home insurance policies take effect?

The time it takes for supplemental coverage -- like flood and windstorm insurance -- to activate varies with each provider and coverage. However, here's what you can expect for the following types of supplemental coverage:

  • Windstorm: Approximately 15 days
  • Flood insurance: Approximately 30 days
  • Homeowners: 48 hours

Do I need wildfire insurance if I have homeowners insurance?

Wildfire damage is covered in your homeowners insurance policy. You don't need a separate policy to protect your home against wildfires. But you should regularly check in on your policy, particularly if you live in California or another area prone to wildfires. 

How should homeowners handle or minimize a high deductible?

"Insurance is meant to protect against larger claims and not as a maintenance program," says Clare Schachter with Woodruff Sawyer. "Low deductibles cost more and encourage clients to submit smaller losses. Ultimately, their rates will increase and their insurability is impaired with their company cancelling them or a new company declining their coverage. If a client buys lower deductibles and doesn't submit small claims, they're paying more for nothing. So, it's best to avoid low deductibles."

Higher deductibles so you get a lower monthly payment, know that many companies offer a deductible waiver. Should your claim surpass a certain dollar amount, you won't be required to put any of your cash towards repairs. 

"It's best to have a thoughtful discussion with your agent to help determine the best coverages and terms so that you fully understand your options."

What can be done to mitigate damages from natural disasters?

If your budget allows, consider doing the following to protect your home:

  • Repair previous storm damage
  • Regularly inspect your roof's flashing
  • Repair or replace any loose or rotting siding
  • Install hail resistant roofs
  • Trim trees
  • Secure all outside furniture
  • Install hurricane shutters
  • Purchase additional coverage