Natural disasters have been a financial pain for many U.S. dwellers. According to data, there have been 341 natural disasters as of 2022, cumulatively costing over $2.475 trillion. Having insurance is crucial if you're to avoid the financial toll of unexpected natural events.
But does your home insurance provide coverage for acts of God?
Homeowners' insurance policies can cover various natural disasters such as tornadoes, wildfires, volcanic eruptions, and wind and hail. However, homeowner insurance policies typically do not cover some disasters, such as earthquakes, floods, and tsunamis.
Here's what you need to know about your home insurance's coverage of natural disasters and how to ensure your property is covered.
What is an Act of God?
Natural disasters occur from events commonly referred to as "acts of God." An act of God is an event, typically a natural disaster, caused by no one's fault and is entirely unavoidable. These include storms, floods, hurricanes, lightning strikes, earthquakes, tsunamis, and volcanic eruptions.
While it was common for people to search for this phrase in the fine print of their insurance policies, insurance providers rarely use this term nowadays. Instead, they directly infer which natural disasters are covered by your policy for a concise communication on the extent of your coverage.
Does Home Insurance Cover Natural Disasters?
Homeowner's insurance policies offer financial protection if your home or personal property is destroyed or damaged in a covered incident. There are several home insurance policies with varying coverages, with the most common one being the HO-3 Special Form.
In most cases, a standard HO-3 Special Form insurance policy will offer various coverage types, such as:
· Dwelling – Coverage A
· Other structures – Coverage B
· Personal property – Coverage C
· Loss of use – Coverage D
· Personal liability coverage – Coverage E
· Medical payments to others – Coverage F
For each coverage, you can amend your policy to include additional coverage. This is done by adding an endorsement.
In most cases, HO-3 Special Form home insurance policies are "open peril," meaning the policy covers all incidences to your dwelling and other structures except those explicitly excluded. For personal property, the coverage is "named perils," meaning you're only covered against perils listed in the policy document.
The Type of Disasters Covered by Home Insurance
According to the Insurance Information Institute, several types of disasters are typically covered by a homeowner's insurance policy. They include the following:
Hurricanes can cause damage to a dwelling, personal belongings, and other structures. Typically, most homeowner insurance policies cover hurricane damage caused by wind and hail, albeit the coverage may be limited.
In some cases, you may need separate coverage for hurricanes, especially if you live in coastal areas. Also, dwellers in coastal areas typically pay higher deductibles for hurricane coverage. Homeowners in high-risk hurricane areas may also need windstorm insurance for adequate coverage.
Hurricane coverage typically doesn't include flood damage. A separate flood insurance policy often covers this.
High wind, hail, flying debris, and fallen trees from tornadoes can cause damage to personal property, your dwelling, and other structures. Most personal property and dwelling insurance policies will cover this type of damage.
For instance, if your roof gets damaged by wind and hail, causing rainwater to leak and damage your home, you should be covered by your homeowner's insurance policy unless the peril is exclusively excluded from the policy.
Dwellers in high-risk tornado areas may pay separate deductibles for wind or hail, called disaster deductibles. Also, standard homeowner's insurance policies do not cover flood damage resulting from tornadoes. You'll need a separate flood insurance policy for coverage.
Explosions are typically covered perils under standard home insurance policies. Therefore, your personal property and dwelling coverage should pay for damages in case of an accidental explosion. This includes explosions caused by civil commotion or riots.
A standard home insurance policy should cover your dwelling and personal property against fire. The extent of the coverage will only be limited by your policy's limits unless you live in an area highly prone to wildfires or you intentionally set the fire.
Depending on the insurance provider, fires may be an excluded peril in your standard homeowner's insurance policy if you live in areas highly prone to wildfires.
Often, teardown and removal of damaged belongings and materials are included in the coverage. However, high-value items such as fine art and jewelry may have limited to no coverage if they're not designated as scheduled property.
Volcanic eruptions may produce dust, ash, shockwaves, and lava flow that can damage dwelling or personal property. Most homeowner's insurance policies should cover these damages, including resulting fires or explosions.
However, resulting landslides, earth movements, mudslides, tremors, or earthquakes are typically not covered.
A lightning strike can cause damage to your home's wiring, start a fire, or create an electric surge that destroys expensive electronic equipment.
Most standard homeowner insurance policies will cover lighting strikes, even if the strike was on a tree that consequently caused damage to your dwelling or personal property. However, in this case, insurance may not cover the costs of removing the tree.
The Type of Disasters Not Covered by Home Insurance
While most standard homeowner's insurance policies provide ample coverage against natural disasters, some disasters remain uncovered. Here are the most common ones.
Flood damage is typically covered by separate flood insurance policies. You can get this coverage from the National Flood Insurance Program (NFIP) or private insurance companies. The NFIP offers coverage up to $250,000, with private insurers providing higher limits.
The cost of flood insurance will depend on your building's characteristics, risk of flooding, policy type, coverage amount, insurer, and deductibles.
Earthquake damages are typically covered by earthquake insurance policies. You can get these policies from private insurance companies. In California, you can purchase a policy from an insurer who's a member of the California Earthquake Authority.
The exact costs of your policy will depend on the home's value, age, building materials, location, and deductibles.
Choose the Right Policy
Securing your home against natural disasters is paramount, given the unexpected nature of such events. While most standard home insurance policies will offer ample coverage, it is best that you consult with your insurer to determine your coverage and limits.
Talk to an insurance professional and learn which policy suits your home and location.