Most homeowners and some renters have insurance to protect their home and belongings. Homeowner and renter insurance typically covers certain natural hazards, such as water damage from heavy snow or rain. As long as you can show that you have kept your domicile in good working order, you can recover the majority of costs for repair and replacement.
However, homeowner and renter policies almost never cover floods, hurricanes, earthquakes and other natural hazards, or perils, as they are called in insurance-speak. Coverage for these perils requires separate policies.
The High Cost of Floods
Flooding is the U.S.’s most common and costly natural disaster
Coverage limit for federal flood insurance policies
Natural disasters that involve some form of flooding
Waiting period for flood insurance policies to go into effect
Average total flood insurance claims per year from 2005 through 2014.
Sources: Lloyds of London, Insurance Information Institute, NFIP
Let it Rain: How Flood Insurance Can Bail You Out
While most homeowner policies cover water damage that is sudden and accidental, like damage from burst pipes or water heaters, flooding from a natural source requires a separate flood insurance policy
The potential cost of recovery from flood damage is so high that only the Federal government provides flood insurance. Commercial insurance agents sell flood insurance, not the federal government itself. Rates are based on the risk of flooding in your geographic area.
If your home falls in a high-risk flood area and you carry a mortgage from a federally regulated or insured lender, your lender is legally mandated to require flood insurance on your property. The federal government does not mandate flood insurance in a low-to-moderate risk area. However, your lender may require flood insurance as a condition of the mortgage loan, even if it is not mandated.
For those who wish to purchase flood insurance and are in a low-to-moderate risk area, your local community must be a registered participant in the National Flood Insurance Program. To find out if your area participates, check the National Flood Insurance Program Community Status Book.
Mother Nature can create a deluge anywhere, but some homes and businesses are located in a flood plain, a geographic location that floods easily. A nonprofit U.S. government group, the National Flood Insurance Program (NFIP), provides maps to show the probability of flooding in locations in the U.S.
The Federal Emergency Management Agency, or FEMA, supplies the data, derived by examining river flow, storm tides, hydrologic/hydraulic analyses, and rainfall and topographic surveys. NFIP has over 100,000 FEMA flood maps. Since flood risk can vary over time due to erosion, climate changes, development and other factors, these maps are updated periodically.
NFIP rates the risk of a flood under three categories:
High Risk: Special Flood Hazard Area (SFHA)
1-in-4 risk that a flood will occur during a 30-year period, the length of a typical mortgage loan
Flood insurance is required for every SFHA-rated home and business that has a mortgage that is federally regulated or is provided by a federally-insured lender
Low- to Moderate-Risk: Non-Special Flood Hazard Area (NSFA)
Some risk of flooding during the lifetime of a mortgage
Flood insurance is not legally required as a condition of a mortgage
Undetermined Risk Areas
FEMA has not conducted flood-hazard analysis in these areas
Flood Insurance Coverage Amounts at a Glance
The price of a flood insurance policy is based on three main factors:
The risk of flooding in your area, as defined by the NFIP
Coverage can include your home structure; additional structures on your property; the furnishings and contents of your home
Like all insurance, you can buy your policy based on paying an initial amount, called a deductible, with the insurance company paying costs over the deductible. The amount of your deductible is a factor in determining your policy premium
The NFIP insures the funding for the flood insurance you purchase from a commercial insurer. The NFIP ceiling for coverage is $250,000 for the structure of a home and $100,000 for personal possessions. The NFIP estimates that nationally, the average cost of a $100,000 flood insurance policy is about $400 a year in a low-to-moderate-risk area. A homeowner may opt for a Preferred Risk Policy, which covers both building and contents. Another option offered by some insurance companies is Excess Flood Protection, for coverage beyond the mandated amounts.
How You Can Lose Subsidized Flood Coverage
The amount of money that the federal government receives as its share of flood insurance premiums represents just a fraction of the actual cost of flood damage. In the past five years, significant flooding has occurred in all 50 states, and the NFIP is $24 billion in debt. The potential for more losses is high: $572 billion worth of property in the U.S. is located in a coastal floodplain.
Congress has passed laws to address the issue. The Biggert-Waters Flood Insurance Reform Act of 2012 ordered FEMA to stop subsidizing flood insurance for businesses, second homes and residential homes that have been repeatedly flooded.
The initial impact of the bill was a 10-fold increase in flood insurance premiums. Responding to market resistance, Congress passed the Homeowners Flood Insurance Affordability Act of 2014, which delayed the new premiums for four years, and allowed homeowners to pass along lower premiums to the next homeowner.
Those who purchase flood insurance now will continue to have subsidized rates for the near future, but the long-range future of subsidies is in question.
When Too Much Water Isn’t a Flood: What’s Not Covered
Flood insurance can cover your home structure and, with a preferred premium, can also cover your belongings. However, flood insurance provides little or no coverage for your basement, car or truck and most outdoor living facilities and fixtures.
- Basements, regardless of risk zone
- Crawl spaces under an elevated building
- Enclosed areas sometimes called “walk-out basements”
- Moisture, mildew or mold damage that reflect poor maintenance by the property owner
- Currency, precious metals, stock certificates and other valuable papers
- Landscaping including trees and plants
- Outdoor fixtures including decks, patios, fences, seawalls, hot tubs and swimming pools
- Temporary housing expenses
- Financial loss due to interruption of business or loss of use of an insured property
- Cars, trucks and other vehicles
Where to Buy Flood Insurance
Not every commercial insurer offers flood insurance — but most major companies like State Farm, All State and others sell these federally-backed policies, as do many independent agents.
The NFIP provides a list of private insurance companies that sell and service flood insurance.
Other good sources to find a flood insurance provider include:
- Your homeowner insurance agent
- Your bank or mortgage lender
Earthquake & Landslide Insurance
Most homeowner policies do not cover earthquakes and “earth movement” that result in damage to your home, related structures or personal property.
Earthquakes are the result of seismic activity: the breaking and shifting of rock beneath the ground’s surface. The U.S. has approx. 20,000 earthquakes a year, many of them minor, but overall, losses in the United States average 4.4 billion dollars a year, according to FEMA, the Federal Emergency Management Agency.
Landslides are an earth movement, but are caused by erosion or water accumulation that destabilizes a landmass, not seismic activity. Landslides are not covered by earthquake, homeowner or flood insurance. Homeowners in landslide-prone areas will need to obtain a separate landslide insurance policy — but finding coverage can be difficult.
Landslides are separate from mudslides. Mudslides are soil and muck carried into or onto your home by a river or excessive rainfall. NFIP-backed flood insurance may include mudslide coverage — check your policy.
The Cost of Earthquakes
Number of U.S. earthquakes a year
Number of U.S. states at risk of earthquake
Number of earthquake policies in effect in California, which is about 10 percent of the state’s homes.
Insured losses if an earthquake the size of the 1906 temblor would strike San Francisco today
Sources: Insurance Information Institute
Is Your Home at Risk for an Earthquake or Landslide?
California accounts for the majority of the country’s earthquake damage cost, followed by Washington, Oregon and Alaska. Prudent homeowners in these states should consider an earthquake insurance policy.
Other U.S. locations have much lower earthquake risk, but the potential damage of an earthquake in an urban area like New York City and Boston is huge. Oklahoma and other Midwestern states have seen a large increase in earthquake activity since “fracking” oil exploration operations began.
The U.S. Geological Survey Department publishes National Seismic Hazard Maps showing seismic activity throughout the nation.
Landslides are based on the characteristics of the terrain surrounding your home. When you seek a landslide insurance policy, the insurers send a technical team to your property to examine:
Hillsides and surrounding areas
The condition of your property and your home’s foundations
The presence or absence of retaining walls
The effectiveness of your drainage systems
Earthquake Coverage Amounts for California
The Golden State is number one in the nation in the costs of earthquake damage. The Northridge earthquake of 1994 caused more than $44 billion in property damage, making it the costliest earthquake in U.S. history.
Although Alaska actually has more earthquakes per year, California has 39 million people living in 13 million households, all of whom live within 30 miles of an active earthquake fault. Over the 30-year term of a standard mortgage, there is a 99.7 percent chance that a strong earthquake (6.7 on the Richter Scale) will occur.
California state law requires that insurers offer earthquake insurance. The State created a nonprofit, the California Earthquake Authority (CEA), to offer earthquake insurance policies. With CEA, homeowners can purchase a “Standard” policy that covers home, personal property, emergency repairs, building code upgrades and living expenses. A less expensive alternative CEA policy, “Homeowners Choice,” covers home, emergency repairs and building code upgrades, but skips personal belongings and living expenses.
CEA estimates rates average approximately $1.75 per $1,000 in coverage. According to the California Department of Insurance, the average hurricane premium in 2013 was $676.
Landslides can be very costly as well. In recent years, landslides have caused an average of $100 million worth of structural damage in California. Average cost for a landslide policy is $4/$1,000 value, or $1,200 a year for coverage on a $300,000 home.
First, the good news: Standard automobile insurance coverage includes vehicle damage from earthquakes, mudslides and landslides.
Next, the less good news: Typical home policies do not cover earthquakes, mudslides and landslides.
Earthquake insurance policies typically have high deductible amounts. Earthquake deductibles are usually a percentage of the cost rather than a dollar amount, with a percentage range from two percent in a low-risk area to 15 percent or higher in high-risk areas
Rates are less expensive for wood-built homes because wood structures tend to withstand earthquakes better than brick or stucco homes
Standard earthquake insurance is designed to get you back into your home, but does not cover your garage, lawn, pool or outdoor fixtures
In California, the California Earthquake Authority is the largest funding source for earthquake insurance. However, California state government does not fund CEA and does not guarantee additional funds in the event of a major earthquake. Simply stated, the CEA could go broke if a major earthquake hits a highly populated area.
For landslides, policies are expensive and hard to find.
A homeowner can only purchase a policy for a home in an area that has no previous history of landslides
Landslide insurance is expensive, more than double the cost of earthquake insurance
Where to Buy Earthquake and Landslide Insurance
In California, the CEA (California Earthquake Authority) subsidizes earthquake insurance and serves as a clearinghouse for the many commercial insurers who sell and service the policies. Here is the CEA’s list of participating insurers.
In states other than California, many major commercial insurers offer earthquake insurance. Premium costs are generally much lower, too: while a California policy in a moderate- to high-risk area averages $1.75 per $1,000, coverage in lower-risk states can be as little as $.50 per $1,000.
Finding landslide insurance is difficult: only one insurance carrier, Lloyds of London, offers coverage, though policies are available from some independent insurance agents. Lloyds will only sell policies in areas that have no previous history of landslide activity.
Even with this restriction, landslide insurance is expensive: Four dollars per year per $1,000 of coverage, which translates into $1,200 per year on a $300,000 house.
A possible workaround for those seeking landslide coverage is to purchase a “Difference in Conditions” policy from a surplus lines insurer. Check with your homeowner insurance policy agent for a referral in your area.
Hurricane & Windstorm Insurance
Windstorm insurance is a type of hazard insurance that covers damages from weather events that have wind gusts of 35 miles an hour or more, including hurricanes, tornadoes and sleet storms.
A homeowners insurance policy may cover some wind-related damage but will not cover damages created by major wind weather events. High winds account for more than $1 billion in damages in the U.S. each year, mainly due to roof damage. Full-scale hurricanes, where winds can reach 200 miles per hour, are even more damaging: an average of $5.4 billion per year. In fact, hurricanes and tropical storms are the single largest source of catastrophic losses over the last 20 years.
Windstorm insurance is available in all 50 states. In states where wind damage is more common, state law may require homeowners to purchase windstorm or hurricane insurance coverage. Homeowners who live in hurricane high-risk coastal areas or in tornado-prone areas of the Midwest are well advised to do so.
Hurricanes pose the greatest risk for catastrophic loss in for the U.S. east coast
The most common month for a hurricane to strike the U.S
The average number of U.S. landfalling hurricanes per year
U.S. county most often hit by hurricane; 15 since 1960
Florida residents live in coastal areas
Sources: Lloyds of London, Insurance Information Institute, NOAA
Is Your House at Risk for a Hurricane or Windstorm?
How likely are you to face a hurricane or windstorm? Hurricane and tornado experts say that the public has become accustomed to relatively low levels of activity over the past 30 years — but that that trend is over, and the U.S. will experience a rise in activity for the next several decades.
For hurricanes, the Atlantic Coast season is from June 1 through November 30; the Pacific Coast season is May 15 through November 30. The peak of the tornado season is April through July, with spring tornadoes tending to be more severe.
- Southeast Florida (Miami-Fort Lauderdale-West Palm Beach)
- Key West and the Florida Keys
- Southwest Florida (Fort Myers-Naples)
- West Florida (Tampa-St. Petersburg-Sarasota-Clearwater)
- Outer Banks Islands, NC (Cape Hatteras)
- Central Texas Gulf coast (Galveston)
- Central Florida Atlantic coast (Melbourne-Cocoa Beach)
- Florida Panhandle (Pensacola-Panama City)
- Central Gulf coast (New Orleans, LA-Biloxi, MS-Mobile, AL)
- South Texas Gulf coast (Corpus Christi-Brownsville)
Living in Tornado Alley
Tornadoes have hit all 50 U.S. states, but are much more frequent in “Tornado Alley,” a geographic stretch that includes Oklahoma, Texas and other Midwestern states. See this map of tornado frequency in the U.S.
To prepare your home for a hurricane or tornado, follow these tips:
Batten Down The Hatches: Securing Your Roof
Secure your roofing and eaves with “hurricane straps,” which are metal strips that add additional joining of your roof to the home’s frame.
Trim Up the Tree
Trim trees and foliage that touch or are near your home.
Clear Your Gutters and Downspouts
Keep rain gutters clean and clear so that rainwater can flow freely.
Coverage Amounts for Windstorm Damage
A windstorm or hurricane insurance policy typically covers damage to your home and personal belongings. Less common are policies that cover your garage, pool and outside structures.
In areas prone to windstorms and hurricanes, insurers write policies with deductibles that are a percentage of the damage, not a set dollar amount. Percentages vary from one to five percent of the homes insured value, though they may be more in hurricane-prone coastal areas. As an example, on a policy insuring a $350,000 home, a five percent deductible means the homeowner pays the first $17,500 in repair costs. In most states, the insurance company determines the deductible percentage, subject to review by state regulatory agencies.
The average cost of a hurricane insurance policy nationally is $600 per year for coverage up to $250,000. However, the same policy in Florida is more than $1,900.
What’s Not Covered by Windstorm Insurance
A good windstorm or hurricane policy means your home and belongings are protected. However, windstorms and hurricanes are weather events often followed by more bad weather, and your windstorm or hurricane policy is unlikely to cover those events.
Your windstorm policy might not include damages by rain that afflict your roofless house after the initial storm
If flooding follows your windstorm or hurricane, your policy will not cover flood damage — that requires a separate flood insurance policy
Loss of Use
Windstorm and hurricane insurance policies do not typically pay for your costs if you have to live in a hotel or other location during the time your tome is being renovated
If the windstorm or hurricane blows a tree onto your car or truck, your policy will not cover the damage — that requires a comprehensive car or truck insurance policy
Where to Buy Windstorm Coverage
Windstorm insurance is an odd duck — some insurers include it as a rider on a homeowners policy, others offer a separate windstorm policy, while still others require a separate hurricane policy.
In some states that have a history of high wind-related damage, like Florida, Hawaii, Louisiana, and Texas, state governments require that all commercial insurers offer windstorm or hurricane policies.
While most major insurance companies and independent agents offer windstorm and hurricane insurance, policies can vary widely in the percentage of deductible you will have to pay and the amount of coverage you have beyond the basics of house and personal belongs. It is up to you, the consumer, to shop for the best coverage.
Guaranteed Replacement Cost vs. Actual Cash Value
The two most common reimbursement methods for claims are Replacement Cost Value (RCV) and Actual Cash Value (ACV). The RCV is the cost to replace damaged property. It is reimbursable to owners of single-family, primary residences insured to at least 80% of the building’s replacement cost.
ACV, by contrast, subtracts depreciation from the replacement cost. For example, if flooding ruins your $500 sofa, then the RCV value is $500, the cost to replace it. You actually owned that sofa for two years before the flood so with depreciation, your ACV value might be $350 — and you have the choice of buying a cheaper replacement sofa, or chipping in a fresh $150.
Insurance for Renters & Owners of Condo Owners, Mobile Homes & Ranches
Like homeowners, renters can obtain coverage for their personal possessions through a standard renter’s policy. To protect those personal possessions in a hazard, a renter will need to purchase individual policies for flood, earthquake, windstorm and earthquake damage to protect personal possessions. As with homeowners, renters can buy hazard insurance subsidized by government or quasi-government entities like the NFIP or CEA.
Condominium associations typically purchase hazard insurance for their complex, in part to respond to state or local ordinances and the terms of their mortgage, as well as to provide a higher level of financial security. Individual condo owners pay for hazard insurance as a percentage of their association dues. However, condo association hazard insurance protects the building and facilities, not the personal belongings of the individual condo owners. A condo owner will need to purchase individual policies for flood, earthquake, windstorm and earthquake damage to protect personal possessions.
These structures are much more vulnerable to the ill effects of hazardous weather and in particular, to flooding and to windstorm and tornado damage. As a result, mobile home owners are more likely to be assessed high percentage rates for their deductible contribution.
Farms and Ranches
For a primary residence on a farm or ranch, hazard insurance works much like it does for a subdivision home: You will need separate policies to protect home and personal possessions against floods, earthquakes, windstorms and tornadoes. Rates are more likely to vary if the terrain and location of the farm or ranch make the structure more vulnerable to the elements. As with homeowners, farm and ranch owners can buy hazard insurance subsidized by government or quasi-government entities.
A further complication arises if this is a working farm or ranch, where outbuildings, machinery, feed and other components of the business are easily exposed to weather. A working farm and ranch may need to seek out an insurance company with experience in their field to get a policy that allows flexibility in what items are covered in their policy.
Your Home’s Circumstances Play a Part in the Insurance You Buy
Natural hazards are fickle. A tornado may touch down two blocks away and flatten a dozen homes, while your street and home escape virtually unscathed.
Although you cannot control fate, you can take a realistic look at your circumstances and do your best to lower your risk of damage from a natural hazard.
Study maps about flood, earthquake, windstorm and hurricane activity in your area
Look at a terrain map of your immediate area and then examine that terrain with your own eyes, so you understand how harsh weather could alter the terrain and threaten your home
Look at how your home is situated — top or bottom of a hill, proximity to tall trees, drainage, isolated on your lot or close to other homes
Assess how to better prepare your home for harsh weather: hurricane straps to better secure your roof, improved water drainage around your foundation, security glass windows to protect your belongings and family, bolted security locks for your garage door
5 Factors to Remember When Shopping for Hazard Insurance
Hazard insurance is potentially very costly to an insurance company, so insurers are very careful about what they include in a policy. A consumer needs to be equally careful in choosing an insurer, by educating yourself on hazard risks in your area and digging into the details of a policy offering. Make sure you know what is covered — and equally clear on what is not covered.
Inventory: What Have You Got to Lose?
Inventory your personal property and assess the amount of coverage you’ll need to replace your possessions. If you have jewelry, collect stamps or have artwork, consider a third-party assessment to ensure you have the coverage you need.
Deductible: How Much Can You Ante Up?
Your policy payment rate will be determined, in part, by your deductible: how much you are willing to pay for repairs and replacement of possessions before the insurance kicks in. If you can afford it, a higher deductible can mean a lower premium payment.
Comparison Shop: Which Policy Delivers the Coverage You Actually Need?
Hazard insurance policies can differ greatly in coverage, deductible amount, replacement value vs. actual value assessment, and premium cost. Much more than with other forms of insurance, you need to shop around until you get the right policy for your circumstances.
Bundling: Do You Qualify for a Discount?
Your current homeowner or auto insurer may offer hazard insurance. Ask for a discount if you bundle hazard insurance policies with your current policy. If you are talking to a company that’s new to you, ask if they offer bundle discounts.
Financial Strength: Will Your Hazard Insurer Withstand a Hazard?
Faced with massive claims after Hurricane Katrina on the Gulf Coast or the Loma Linda earthquake that hit Oakland and San Francisco, several insurers went bankrupt. If you are not sure of the financial strength of your hazard insurer, check your state insurance commissioner. See this list of state insurance commissioners.
What Affects Your Hazard Insurance Premiums
Hazard insurance is weather-related, so where you live and the condition of your house are important factors in determining your policy premium. In many cases, state subsidies or lender mandates also play a part in pricing. Of course, insurance is also a commitment to pay over an extended period of time, so financial information like your credit rating play a part as well.
Factors that have an impact on your hazard insurance premium:
Do you live in a low-, moderate-, or high-risk area for a natural disaster like flooding, earthquake, tornado, landslide or windstorm? Historical information will factor into the insurance company’s assessment of your risk, and therefore your premium — unless state law determines the amount.
Your insurer may also do a survey of your property and its surrounding terrain to determine your risk somewhat precisely.
Your insurance company will need to consider the cost of repairing your home after a natural disaster. A home constructed of wood, for instance, can withstand an earthquake better than one constructed of brick or stucco.
If your home is older, was poorly constructed or suffers from low maintenance, the insurance company will determine that it is more likely to sustain high levels of damage in a disaster, and may increase your premium to offset the potential cost.
Disasters often mean that roads are blocked by debris, so access to emergency services is limited. The risk of additional damage to a home from fire, mildew, contamination and other post-hazard dangers is high.
If you live far away from a firehouse, municipal service center or other source of help, your insurance company will likely charge a higher premium.
If you have already sustained a natural emergency like flooding or a landslide and your insurance company has footed the bill for repairs, they are likely to demand a higher premium to provide for similar coverage.
Most insurance premiums are paid monthly. Your insurance company will check your FICO score to determine if you have a good record of keeping up with monthly payments on other costs.
The Insurance Information Institute is an insurance industry-supported nonprofit that provides a wealth of information on insurance topics, including hazard and catastrophe insurance.
The U.S. National Flood Insurance Program is the nation’s source of funding for flood insurance, and FloodSmart is its consumer information site. The site provides information on residential and commercial flood insurance, what to do to prepare for a flood — or to recover from one — and a find an agent tool.
Q&As on flood insurance compiled by six agencies, including the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corp., Office of Thrift Supervision, National Credit Union Administration, and the Farm Credit Administration.
The California Earthquake Authority (CEA) is a nonprofit organization that provides information on earthquakes, including insurance policy information and tips on preparing for and recovering from a quake. The CEA also provides maps of earthquake risks in California.
The National Hurricane Center, a division of the U.S. National Oceanic and Atmospheric Administration, provides information on hurricanes, including advisories of current hurricane risks throughout the nation. The NHC website also includes an interactive map showing 170 years of U.S. hurricane history, a handy way to determine hurricane risks in your area.
In an average year about 1,000 tornadoes are reported nationwide, according to the National Oceanic and Atmospheric Administration.
Large insurance syndicate assesses the risks from U.S. tornado damage. Every year an average of 1,200 tornadoes kill up to 60 people, injure 1,500 and cause at least $400 million in economic damage in the US.