The recent string of hurricanes that hammered the southeast U.S. with the addition of wildfires raging across California has turned a lot of homeowners’ minds to the idea of natural disaster insurance. If you find yourself in a similar state of mind, here are a few things you should understand about natural disaster insurance.
Homeowners Insurance Doesn’t Cover Natural Disasters
Most homeowner’s and renter’s insurance policies are designed to cover unforeseen damages, but not all unforeseen damages. When damage results from events like floods, earthquakes and rising water, a typical homeowners insurance policy won’t suffice. If you live in an area that’s prone to one or more natural disasters, you’re going to want to look into purchasing a separate insurance policy or add a rider to your existing policy that covers whichever natural disasters your home’s location is prone to. It’s important to note here that although a wildfire could be considered a natural disaster, this peril is almost always covered under your homeowner’s insurance policy without the addition of any special rider. The trick, though, is obtaining homeowner’s insurance in a high-fire risk area in the first place. It is available, but it can be costly. Click here for more information on this topic.
You’ll Need Some Cash on Hand
Depending on the policy you choose, your natural disaster insurance will cover a significant portion of damages. However, there’s often a deductible involved. Earthquake insurance, for example, can require policyholders to pay as much as 15% out-of-pocket. By earmarking some of your savings in the event of a natural disaster, you’ll be well-prepared to handle the costs you incur as a result. Fortunately, earthquake insurance is becoming more affordable – and they can be purchased with lower deductibles – some as low as 5%.
Some Natural Disaster Insurance Policies Include a Waiting Period
Renter’s, homeowner’s, health and auto insurance usually kick in right away once you purchase a policy. Flood insurance comes with a waiting period. The period is usually 30 days, during which if a flood were to occur, you would not be covered. Because of this, it’s best to buy natural disaster insurance before you think you might need it. Click here for video – compliments of WMURg Tom Babbit.
Sometimes You’re Forced to Buy Natural Disaster Insurance
If you’re in the process of buying a new home that’s located in a high-risk area, your lender may require that you buy natural disaster insurance as a requirement for qualifying for the loan. We have only seen this in the case of flood insurance, but of course your lender will always require that you purchase homeowner’s insurance – and if in a high-fire risk zone, this can be challenging. Whatever the case, make sure you take the requirement seriously and buy a policy that provides adequate coverage. If your home is in a high-risk area, the odds of you making a claim at some point in the future increase significantly – and you may want to include this fact as an important deciding factor in your home purchase.
Video compliments of WMURg Tom Babbit.