4 Major Disasters Homeowners and Renters Insurance Won’t Cover
Money Girl explains 4 major disasters that are surprisingly not covered by home or renters insurance.
Having homeowners or renters insurance is an important part of protecting your personal finances. But just because you have a policy doesn’t mean that every potential claim or cost will be covered.
Unfortunately, many people don’t realize this until after a disaster strikes and it’s too late. So, in this episode, I’ll review what is and isn’t covered by home or renters insurance. You’ll learn 4 major disasters that are surprisingly not covered, and what to do to stay safe.
What Homeowners Insurance Covers
Last week, after the strongest earthquake in 25 years hit northern California, I was chatting with a Money Girl Facebook follower named Mariela. She said, “I’m so glad I got earthquake insurance because of you!” She gets a virtual high-five.
Sadly, many people without earthquake insurance won’t be feeling so grateful when they attempt to make a claim and find out that their damage isn’t covered by a typical homeowners or renters policy.
Before I tell you more about what is not covered by a home policy, let’s back up so you understand what is. A standard homeowners policy gives you 4 main types of coverage:
- Dwelling coverage: pays to rebuild or repair damage to the structure of your home caused by a covered event, such as a fire, hurricane, hail, lightning, vandalism, or other disaster listed in your policy.
- Contents coverage: pays to repair or replace your damaged or stolen personal belongings, such as furniture, sporting equipment, and clothes. You’re covered anywhere in the world, as long as the loss is caused by a covered event.
- Liability coverage: protects you if you’re sued because you, family members, or pets cause property damage or medical injury on your property, or while you’re away from home.
- Additional living expenses: pays you a certain amount if you’re temporarily unable to live in your home due to a covered event, such as a fire, lightning strike, or storm.
See also: 5 Ways to Save Money on Home Insurance
What Renters Insurance Covers
If you rent an apartment, condo, or house, you need renters insurance. It gives you many of the same protections as homeowners insurance, except that you don’t insure the physical dwelling—that’s the landlord’s responsibility.
A standard renters policy protects you against the same covered disasters as home insurance, such as fire, lightning, storms, and theft. It covers your personal belongings, liability, and additional living expenses, if you have to move out while repairs are being made.
Renters insurance is a very inexpensive policy that costs $185 a year on average across the U.S. Remember that in the event of a disaster, your landlord might be sympathetic about your damaged or stolen possessions, but he or she isn’t obligated to replace them for you.
Read or listen to Your Guide to Renters Insurance, to learn more.
See also: Do College Students Need Renters Insurance?
4 Major Disasters Homeowners and Renters Insurance Won’t Cover
Now that you know what home and renters insurance generally covers, here are 4 major disasters that they won’t cover:
Disaster #1: Earthquakes
Basic home and renters policies don’t cover earthquake damage to your property or personal belongings. As you can imagine, intense shaking can destroy entire buildings and valuable contents.
Note that if fire erupts or broken pipes cause water damage following an earthquake, those damages would be covered by a typical home policy in most states.
While a flood may seem very different from an earthquake, they do have something in common: neither one is covered on a standard home or renters insurance policy.
A majority of the world’s strongest earthquakes take place on the Pacific Coast, from Southern California to Alaska. But the U.S. Geological Survey says that more than 20 states have experienced measurable earthquake activity in the past 30 years. I’ve lived in South Carolina and Florida, and felt earthquakes in both of those states.
You can see a map of the top earthquake states at the U.S. Geologic Survey website, earthquake.usgs.gov.
In most states, home insurers offer earthquake insurance as a supplement, and premiums vary widely depending on the risk factors where you live. Contact your insurance agent or company to get an earthquake quote. If you live in California, check out the California Earthquake Authority (CEA) premium calculator to see rates for your area.
Disaster #2: Floods
While a flood may seem very different from an earthquake, they do have something in common: neither one is covered by a standard home or renters insurance policy.
Don’t think that just because you don’t live on a river or ocean,you’ll never experience a flood. According to the federal government’s National Flood Insurance Program, nearly 20% of flood claims come from low- to moderate-risk areas.
Flood insurance is issued by the federal government and a few private insurers, but is sold through independent agents or insurance representatives. If you have a mortgage, flood insurance may be required by your lender if you live in a high-risk flood area.
Just like with earthquake coverage, premiums for flood insurance vary depending on where you live, but may be as low as $129 per year. Visit floodsmart.gov to learn more.
Disaster #3: Sewer backups
Would it be poor taste to say that having a sewer backup really stinks? Not just because it’s a health hazard, but because cleaning it up typically isn’t covered by a standard home insurance policy.
Homeowners are responsible for maintenance of their sewer lines. If you have a sewer backup due to aging pipes, blockages from tree roots, or from excess storm water runoff, it can ruin floors, walls, electrical systems, and personal belongings.
The good news is that you can get an endorsement to your homeowners policy to cover sewer backups that could cost as little as $50 per year.
Disaster #4: Mold
Mold is another health hazard that can creep up on you in your home. According to the Insurance Information Institute, there are over 1,000 different species of mold in the U.S. It can make you sick, cause allergic reactions, and be expensive to clean up.
But a standard homeowners policy typically limits coverage for mold damage, or excludes it. Some insurers offer an endorsement to increase your protection against mold.
How to Protect Your Property from Natural Disasters
The best way to protect your property and belongings from the risk of various natural disasters is to discuss your potential risk with an insurance company or agent. Ask whether you need specialized coverage beyond what a typical home or renters policy provides.
Get multiple quotes and advice from different insurance providers, such as:
Then weigh the information you’re given carefully. Ask about what discounts you may qualify for, such as having an alarm system, smoke detectors, or a new roof. Also, remember that maintaining good credit helps reduce the cost of insurance. Read or listen to What You Should Know About Credit-Based Insurance Scores to learn more.
Take the time to review all your insurance at least once a year to make sure you aren’t over- or under-insured and have the most affordable coverage possible.
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Heavy Flooding image courtesy of Shutterstock
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.
