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The latest natural disaster for Americans — a spate of wildfires in Northern and now Southern California — offers a sobering reminder of dangers that we can’t control. The fires come on the heels of devastating hurricanes in Puerto Rico, Florida and Texas.
In some places, the main threat is flooding, elsewhere it’s tornadoes. Meanwhile, earthquakes are a constant preoccupation in parts of the country.
We can’t prevent these disasters, but we can prepare for them. Now is an excellent time to make sure you have the right insurance coverage in the event that your house is damaged. Before we cover individual disasters, here are basic steps everyone can take:
- Read your policy. Or review it with an agent or broker to learn what is covered and what the limits are. Consider filling coverage gaps with additional insurance, an umbrella policy for added liability coverage, for example.
- Cut costs. Get the coverage you need affordably with such strategies as discounts, comparison shopping and higher deductibles. Here are eight ways to cut the cost of homeowners insurance.
- Inventory your possessions. You’ll save money and time making a claim by having a video record of your home’s contents. Read “6 Tips for Making a Home Inventory Right Now.”
- Get liability coverage. If someone is hurt in your home or by someone in your family, including pets, your homeowners policy’s liability coverage pays damages and court costs. Most homeowners insurance policies have a minimum $100,000 liability limit, according to the Insurance Information Institute, an insurance industry nonprofit. “Increasingly, it is recommended that homeowners consider purchasing at least $300,000 to $500,000 worth of coverage of liability protection,” the institute says.
Here’s a summary of what home insurance policies do and don’t cover, along with steps to take to protect yourself at a price you can afford.
Wildfires: Are you covered?
Your homeowners policy probably doesn’t cover many disasters, including mudslides, sinkholes, war, pollution, mold, sewer backup, landslides, earthquakes and floods. But it does protect against fire, including wildfires, says the National Fire Protection Association’s Firewise site.
Do you have enough coverage? The Insurance Information Institute advises buying enough to:
- Replace your home’s structure. To tell if your coverage is adequate, ask one or two local builders to estimate the price of replacing your home. If you own an older home, the institute adds, you may not be able to buy a replacement-cost policy. Instead, you may have to buy a modified replacement-cost policy.
- Replace your stuff. A homeowners policy typically covers the replacement value of possessions inside the home — your furniture, tools, appliances, clothes and valuables — but with limits. You may need additional coverage to fully insure expensive jewelry, art or collectibles.
- Cover loss of use. You could spend thousands of dollars on shelter and meals while your home is being repaired. Get a policy with a generous allowance for loss of use.
Hurricanes: Are you covered?
Hurricane season — which runs from June 1 to Nov. 30 — brings risks from high wind, rain and flooding in storm-prone regions.
Your homeowners policy may cover some wind damage. Read it or review it with a professional to find the limits and specifics. Wind damage coverage often has a separate, higher deductible. For example, if your home is worth $250,000 and the hurricane deductible is 3 percent, you’d pay $7,500 out of pocket before your insurance kicks in.
Water damage is trickier. Homeowners policies typically cover water damage only in limited instances. For flood protection, you need to get separate insurance.
Floods: Are you covered?
Standard homeowners and renters policies do not protect you in the event of flood damage, according to the Insurance Information Institute. However, you can purchase flood insurance coverage through the National Flood Insurance Program. Keep in mind the following:
- Flood insurance has a 30-day waiting period before coverage begins.
- You’ll need separate policies for the home’s structure and its contents.
- The maximum coverage is $250,000 for a structure and $100,000 for contents.
Other tips for protecting your home from flood damage include:
- Find out whether you’re required to get flood insurance. You can check the risk of your property flooding by looking it up in the Federal Emergency Management Agency’s Flood Map Service Center. If you live in a flood plain you will be required to buy flood insurance. The federally backed insurance rate for a given property should be the same with every agent and company providing flood policies.
- Consider optional flood insurance. You may want flood insurance even if it’s not required. After all, more than 20 percent of claims for flood damage compensation come from properties outside high-risk flood areas, FloodSmart.gov says.
- Look into renters flood insurance. Your landlord’s insurance for your rental home won’t cover the loss of your possessions. FloodSmart.gov also explains flood insurance for renters.
- Correct the flood map. If you think the flood map has an error, ask FEMA for a letter of map change.
- Check building ordinance coverage. CNBC points out that your homeowners policy may pay to rebuild your home after a storm but not cover the cost of meeting upgraded building requirements. When you shop, look for policies with building ordinance coverage or purchase a separate rider.
Important note: U.S. lawmakers are debating changes to the NFIP that could significantly change the program. In November, the House passed a bill to reauthorize the program, but with a more limited scope. The Senate has not finished its version. It is unclear whether the two houses can hammer out a deal and meet the Dec. 22 deadline for reauthorizing NFIP. ABC station KTBS in Shreveport, Louisiana reports on the implications:
Lawmakers from flood-prone states like Louisiana have insisted on provisions to keep coverage affordable while a group of fiscal hawks have pressed for reforms that would jack up premiums for some vulnerable policyholders.
A lapse in the program would’ve caused havoc in real estate markets in south Louisiana, holding up mortgages for anyone eyeing property in high-risk flood areas and creating uncertainty for buyers, sellers and lenders.
Earthquakes: Are you covered?
Earthquake country is bigger than many realize, as this National Geographic map shows. Homeowners insurance doesn’t cover earthquake damage. You’ll need a separate policy or endorsement on your homeowners policy. Unfortunately, this insurance usually has high deductibles and expensive premiums. Bloomberg says:
The average earthquake policy in California in 2013 was $676 a year, according to the California Department of Insurance, and policies often have a deductible of 10 percent or 15 percent.
If your home suffers $400,000 in damage, you’d cover the first $40,000 to $60,000 out of pocket, for instance. What’s more, your quake insurance would not cover flooding from an earthquake-caused tsunami. You would need separate flood insurance for that.
Here are some tips for preparing for earthquakes:
- Investigate renters insurance for earthquakes. A standard renters insurance policy won’t include earthquake coverage for your possessions or help with living expenses while your rental home is repaired. Your landlord’s insurance won’t help, either. Ask an insurance broker about earthquake policies for renters.
- Learn more. The National Association of Insurance Commissioners’ publication “A Consumer’s Guide to Earthquake Insurance” covers the subject in more detail.
- Bolt your home to the foundation. Whether you get quake insurance or not, retrofitting your home to keep it from sliding off the foundation can minimize damage. HouseLogic explains how to do it.
Looking for more information? The Federal Emergency Management Agency’s brochure “Reduce Your Risk From Natural Disasters” has low-cost measures to take against quakes, floods, hurricanes and wildfires.
How well-prepared are you for the type of disasters that threaten your area? Share your comments below or on our Facebook page