Earth, wind & fire: Preparing your home insurance policy for the unexpected

Consumer protection, Real estate, Safety

In the wake of a devastating and unexpected natural disaster, many policyholders find themselves displaced from their homes and facing enormous obstacles to regaining their normal lives.

Not surprisingly, insurance companies’ brightly colored gimmicks used to lure in potential customers can quickly dim upon the realization that some damage caused by natural disasters is not covered under the policy. With dramatic differences in coverage for even closely related causes of destruction, the lines drawn by insurance companies can be mind-boggling. Flood coverage, for example, might encompass ground water flooding but not flooding caused by water from above.

The following article will shed light on common issues facing homeowners in the aftermath of a weather catastrophe.

Flood damage

Coverage ­– or lack thereof – following a flood is one of the most misunderstood nuances of home insurance policies. In general, home insurance policies do not cover damages caused by a flood, despite the fact that a flood has the ability to completely destroy your home and everything in it.

Even if the structure remains, exposure to flood waters can weaken the foundation, cause mold, destroy personal belongings and generally wreak havoc on your living space.

Another important caveat in flood damage coverage  pertains to the source of the flood. Unbelievably, most insurance policies will cover damage caused by a hurricane but not damage caused by a flood, even if the flood occurs as the result of said hurricane.

Other policies make a distinction between water damage due to rising water and falling water, the former triggering an exclusion and the latter amounting to an acceptable claim.

So, what can a homeowner do to avoid the perils of uncovered flood-related damage? For starters, any home purchased within a flood plain, as determined by FEMA, will likely involve a mandatory flood insurance policy at the direction of the mortgage lender. Even if you live outside the flood plain, never discount the possibility that a major storm could cause surges that reach your front door.

For the savvy homeowner, consider the following flood facts:

  • The federal government offers flood insurance policies. Keep in mind that the maximum structural payout is $250,000, and the maximum payout for personal belongings is $100,000. If your home and its contents are worth more than $350,000, you may want a supplemental policy.
  • An estimated 25 percent of flood claims are for properties outside a flood plain. Don’t assume your location eliminates flood risk.
  • Flood insurance policies usually have a 30-day waiting period before a claim can be filed. So, don’t wait until you see dolphins in the driveway before calling your agent.
  • A water backup endorsement is another option to cover floods originating from drain or sump pump backups, two types of damage not covered under standard home insurance policies.

Forest and wildfires

This summer season has demonstrated the enormous damage wildfires can cause, displacing entire communities and forcing homeowners to live in shelters while they wait out the fiery menace. Devastatingly, many return to see their homes reduced to ashy piles of rubble.

In 2012, wildfires tormented Colorado residents and resulted in over a half-billion dollars in damage. Fortunately, many – but not all – standard home insurance policies provide coverage for damage incurred as a result of wildfire, as well as for water damage caused by firefighters’ hoses. In addition, many policies cover incidental expenses, such as food and lodging, that occur following a mandatory evacuation.

If you are unsure whether your property is covered for damage caused by wildfires, be sure to read the fine print. Some companies have opted to drop wildfire coverage from their standard policies.

Some insurance companies will refuse to write policies on homes with features that encourage wildfire damage, such as a flammable wood shake, or shingle, roof. Others now offer discounts on policies covering homes with wildfire mitigation features, such as a noncombustible roof.

Wind damage

Wind damage is a more broad-spectrum insurance concern, as it can cause a wide range of issues and derive from a number of natural disasters, including hurricanes, tornadoes and blizzards.

Again, read the fine print of your policy, as it will likely specifically spell out the extent of your coverage following wind-related destruction.

One of the most common problems occurring during a wind storm involves damage to the roof, and, thankfully, many policies cover this issue if the damage occurred during a noted natural disaster.

The issue becomes more complicated, however, is when damage occurs due to projectiles from a neighboring property or when your own belongings cause damage to someone else’s property.

Earthquakes, mudslides & landslides

Like floods, earthquakes are usually not covered by standard policies. Supplemental coverage is generally required for property in high-risk areas.

Likewise, mudslide coverage typically requires a supplemental policy. Many policyholders incorrectly believe that their flood insurance policy will cover the effects of a mudslide. In reality, flood insurance providers draw a line of distinction between a mudflow and a mudslide; the former triggers coverage while the latter triggers an exclusion.

If you live near a hillside or in an area prone to landslides, you should consider insurance covering rock and runoff damage. Be aware that insurance companies are often extremely hesitant to insure against this risk, and landslide policies are notoriously difficult to obtain.