With the news media filled with stories lately about
natural disasters like earthquakes, hurricanes and wildfires, many
consumers may be wondering when to purchase additional insurance to
protect their homes from Mother Nature. My husband and I certainly have
been concerned with the topic since moving to California this year.
Here’s a look at how to determine if your home needs extra insurance
Earthquakes: Standard homeowner’s and rental insurance
policies don’t cover damage from earthquakes. Instead, such coverage
needs to be purchased separately from companies working with the
California Earthquake Authority or private insurers. But because the
policies can be expensive and generally come with deductibles of 10 to
15 percent, they are not always worth the extra cost. To figure out if
the insurance is worth it, homeowners living in areas prone to
earthquakes should first determine what kind of damage their home is
likely to sustain in an earthquake. (California residents, enter your
address or locale at this site and this one to find out.)
Factors to consider include whether your home sits on bedrock or fill,
what kind of foundation it has, whether it’s on or close to a fault line
and if the house is made of sturdy material. Then call the authority
and insurers for some quotes and calculate whether the amount of likely
damage is worth the additional insurance expense, taking into account
out-of-pocket costs and how much risk you’re willing to bear.
According to United Policyholders, a nonprofit group focused on
educating consumers about insurance, only about 10 percent of insured
homeowners in California currently have earthquake insurance. For
renters, the policies are often much cheaper because they don’t cover
the actual structure. Still, renters need to make sure glass and other
valuables are covered by a given policy, said Amy Bach, executive
director of United Policyholders.
Floods: Standard homeowner’s and renter’s policies
similarly don’t cover damage from flood-related ground water.
Determining whether to get the additional flood coverage available from
the National Flood Insurance Program or private insurers and how much to
buy generally involves a similar calculation of expected damage versus
expected insurance cost.
While mortgage lenders often require that homeowners living in flood
plains have some sort of flood insurance, even in flood-prone regions,
not all homes face the same risk and thus, don’t need the same amount of
protection. A home on a hill, for instance, may sustain less damage
than one right next to a stream.
To determine how at risk your home is from flood damage, J. Robert
Hunter, director of insurance at the Consumer Federation of America,
suggested checking local flood insurance rate maps, which provide
indications of the flood risk for a particular address and details about
what can happen in a 100-year flood. (A local city hall or building
commission will probably have a copy of the map or know where to get it,
Mr. Hunter said. Entering your address at FloodSmart.gov can help you
figure out your home’s flood risks, too.)
“If your home is in a high-hazard area but is not at an elevation at
risk of a flood, you might not consider buying flood insurance” or at
least not as much, he said.
Hurricanes: Covering wind damage has generally been
part of standard homeowner’s policies, but that’s no longer always the
case in areas prone to hurricanes, according to Mr. Hunter and Ms. Bach.
As a result, if you live in such an area, you’ll need to find out
whether wind damage is covered in your standard policy and if it’s not,
consider purchasing coverage for both wind and flood damage.
As for renters, Jeff Reinig, a senior vice president at Farmers
Insurance responsible for homeowner products, said it was rare that a
rental insurance policy would exclude wind damage. “In general, wind
coverage is going to be included in the renter’s policy because there’s a
lot less risk of damage to personal property from wind” compared with
the risk of damage to the building structure, he said.
Fires: Damage from fires is generally covered under traditional
homeowner’s and rental policies. Still, the amount of coverage may not
be enough to cover a total loss, Ms. Bach said. She suggested that
homeowners check the details of their policy and look into buying enough
coverage for rebuilding a home if it’s destroyed by fire.