Does Insurance Cover Natural Disasters?

In 2021, the world experienced several severe weather events. In all, these natural disasters caused more than $343 billion in damages globally. Of this damage, only $130 billion (86%) was covered by insurance. That left a whopping $213 billion in damages uncovered.

If a disaster were to strike tomorrow, would you be covered? To make sure you are financially protected, take time to evaluate your insurance policies, understand what natural disasters are and aren’t covered, and speak to your insurance agent about adding any additional coverage. This way, you can be confident you have coverage in place if you need it.

Insurance Has Its Limits

Standard home insurance policies protect your home from many natural disasters. However, there are a few perils that typically are excluded. If one of those disasters strikes, your insurance company doesn’t have to pay for the damages.

Here’s a quick look at a few common weather events and if they’re usually covered.

Of course, insurance policies vary. Read your policy carefully to see what types of damages are included or excluded.

Homes aren’t the only things that can get destroyed in a severe weather event; so can your car. Auto policies with comprehensive coverage typically insure against natural disasters. Collision-only insurance often excludes disaster-related coverage. Without comprehensive coverage, such repairs are generally out of pocket.

Does Home Insurance Cover Natural Disasters?

A standard home insurance policy usually covers many types of catastrophic events. However, if you live in an area prone to excluded perils, speak to your insurance agent about your options for additional protection.

Here’s more information about some common disaster coverages available.

Flood Insurance

Floods aren't covered by standard home insurance policies, although mobile-home policies may include it. FEMA states that in simple terms, flooding is excess water on land that’s usually dry and that impacts two or more properties or acres of land. For protection from flood-related disasters, purchase a policy from the National Flood Insurance Program (NFIP). Many major insurance providers offer flood coverage.

You can decide if you want to purchase building coverage, contents coverage, or both. Building coverage protects your home and home systems such as plumbing, electrical, and built-in appliances. Content coverage insures your personal belongings.

Earthquake Insurance

Projections in the 1990s changed the way many insurance companies handled earthquakes. Back then, it was projected that a large earthquake could send insurers into bankruptcy. Afterward, most standard home insurance stopped including earthquake coverage.

If you live in an area where earth movement is common, consider purchasing an earthquake policy. Typically, this covers damages caused directly by the earthquake to your home and personal possessions. The cost of cleanup is also often included.

Windstorm Insurance

While wind is a covered peril on most insurance policies, you may need to add it to your policy if you live in a coastal city. Some policies also have a special deductible for wind losses due to hurricanes or other named-storm events such as tropical storms or cyclones. Currently, 19 states and Washington, D.C. have hurricane or named-storm deductibles, many of them in locations prone to these types of disasters. Other states may also allow insurers to have this type of deductible.

If you have a hurricane deductible, and a named storm causes wind damage to your home, you’d have to pay your hurricane deductible instead of your standard deductible. This deductible is usually a percentage of your home’s dwelling coverage. Choosing amounts between 1% and 5% are typical, although your options may go as high as 10%.

The hurricane deductible is higher than your standard home insurance deductible. For example, if you file a claim for $10,000 worth of hurricane damage on a $200,000 insured-value home with a 2% hurricane deductible, your insurance company would pay $6,000 on an approved claim and you’d be responsible for the remaining $4,000.

Fire Insurance

In 2021, wildfires ravaged 7.1 million acres in the United States. And while fires are typically covered on a standard homeowners insurance policy, some companies are issuing non-renewal notices for homes in areas prone to wildfires. Not being approved for insurance because of fire risk is also a possibility.

If wildfires are excluded from your policy, or you need additional coverage, you might be able to purchase a separate fire insurance policy. However, if you live in a canyon or other high-fire-risk area, your only option may be to purchase a Fair Access to Insurance Requirements (FAIR) Plan, which may be available to you when standard insurance isn’t.

Does Renters Insurance Cover Natural Disasters?

Similar to homeowners insurance policies, renters insurance covers your belongings when they’re damaged in some types of natural disasters. Typically, windstorms, fires, and hail damage are covered, while floods and earthquakes are not.

Make it a point to review your policy documents to see which natural disasters are excluded from your renters insurance policy.

Does Car Insurance Cover Natural Disasters?

If you have comprehensive car insurance coverage, damages from flooding and natural disasters such as hail, tornadoes, and ice are covered. Comprehensive coverage also usually includes striking an animal or explosions.

This type of coverage can help you repair or replace your car when something that isn’t collision-related causes damage to your car.

Choosing Insurance Coverage and Limits

Now that you know more about what natural disasters are covered by standard insurance policies, it’s time to think about what coverage you need. To help you decide if you need to purchase a special policy, ask yourself:

• What natural disasters are common in my area? Your location can help you pinpoint the coverage you need, such as flood insurance if FEMA determines your home is in a special flood hazard area or has a moderate flood risk.
• Are those disasters excluded by my current insurance policies? Each policy is different. Take time to read your documentation, and call your insurance agent if you can’t tell what’s covered.
• Do I have enough money saved to pay out of pocket for repairs or replacement costs for my home and personal belongings if a disaster strikes? If you have the money to start over again if something happens and still pay off your existing mortgage, you may decide a separate policy such as earthquake insurance isn’t worth it. For most people, such policies are financial safeguards.
• How much coverage do I need? What’s the value of your home, your car, and your possessions? Many Americans are underinsured, so make sure you have high enough limits to offer you full protection if you need it.

Answering these questions can help show gaps in your current coverage. This way, you can get the protection you need before a disaster happens.

Frequently Asked Questions (FAQs)