Natural disaster insurance: How to protect your home from hurricanes, wildfires and more

Homeowners insurance often doesn't cover damages from natural disasters, but flood, windstorm and other insurance policies can.

Climate change is continuing to cause massive destruction across the US and the rest of the world. Bill Gates warns that climate change disasters could become just as deadly as COVID-19. 

Last year was the fifth warmest year on record and saw 22 events, including record numbers of hurricanes and wildfires, that individually caused over a billion dollars in damages -- making natural disaster insurance coverage more important than ever.

Will the fires and storms calm down moving forward? Don't bet on it. The US Global Change Research Program's fourth report on national climate assessment concludes that climate change is only going to increase the occurrence and severity of billion-dollar disasters. 

For homeowners, this means taking action now to protect your home, property and investments.

A traditional homeowners insurance policy protects against some damages from natural disasters -- depending on the type of disaster and where you live -- but it  won't protect your home against everything. 

To mitigate expensive repairs and rebuilding costs, you'll need to purchase additional coverage.

Homeowners insurance is the bare minimum you need to protect your home. If you live in an area that is prone to natural disasters, such as wildfires, hurricanes or earthquakes, supplemental insurance may be needed.

We'll walk you through the most common natural disasters in the US and let you know how to lower your financial risk with the right insurance policies.

According to the Insurance Information Institute, there were 58,950 wildfires across the United States in 2020. 

We saw 10.1 million acres damaged and six of California's largest wildfires in recorded history. One particular fire in Napa and Sonoma counties caused 2.9 million dollars in damage.

While wildfire damages are often covered by homeowners insurance, providers have recently been canceling policies in high-risk areas such as California. 

A moratorium on cancelling homeowners insurance policies was put into place in 2019 through the end of 2020. 

And, with another state of emergency declared in California, another moratorium is forthcoming to prevent homeowners from losing coverage in high-risk zip codes as wildfires continue to rage across the state.

"Due to the Wildfire Catastrophes of 2017, 2018, 2019, 2020 and 2021, Insurance Companies in California have been paying millions of dollars in claims to their policyholders," says Andy Barajs from State Farm. 

"Insurance companies have not had a break and when the claims funds become scarce, they simply cannot afford [to pay] more claims. 

This is why some insurance companies are looking for any excuse not to renew with policyholders and why many companies are leaving California altogether. 

In the event of a wildfire, the moratorium puts a temporary stop to this practice and is forcing insurance companies to renew policies and continue to help policyholders that live near wildfire areas."

To ensure your policy is renewed, Barajs recommends not filing small claims if you can help it and speaking with an agent about which actions might get your policy canceled. 

"You should also investigate which companies are still insuring in your area. This way you'll be better prepared in case your insurance carrier decides not to renew your policy." 

Floods cause billions in damages each year, with $20 billion in damages expected this year, according to a New York-based flood research nonprofit, First Street Foundation. And, 40% of all flood claims filed between 2014 and 2018 were from homeowners outside of high-risk flood areas. 

Flood damage is not covered by a standard homeowner's policy. For flood protection, you need to get a separate flood insurance policy through the NFIP -- a federal government sponsored flood insurance program -- or a private insurer. 

If you get flood insurance through the NFIP, a basic policy comes with $250,000 for the home itself and $100,000 for personal property. Also, there is a 30-day waiting period for every new policy before you can file a claim, which means you need to buy a policy well before you need it. Flood insurance covers damages to the following: 

However, flood insurance does not protect you against everything related to water damage. This means that the following are not covered by flood insurance:

Flood insurance is required in all areas FEMA has deemed an A zone.  To see if you are in an area prone to flooding, you can enter your address into FEMA's flood map.

"Many clients are in denial that an earthquake, flood or other disaster would impact them," says Clare Schachter (CIC, CPRM, CPRIA), Vice President of Woodruff Sawyer. 

"As an example, a client [with a] mountain home on a river chose not to purchase flood insurance after one major flood didn't impact them. It was discussed many times, but their decision remained the same.

Then several years later, a flash flood caused them to lose their home and there was no coverage. They lost everything." 

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