If you have been a victim of a major weather storm like Hurricane Harvey, a forest fire, severe hail, flood or an earthquake, you have a pretty good idea of why homeowners, landlords and renters may need catastrophe insurance. These events have occurred with an alarming frequency recently. In fact, on average, about 6% of homeowners file catastrophe claims each year.
What are the different kinds of catastrophe insurance and how do you decide which coverage you really need? Different areas of the country are most definitely affected by different catastrophes. Start by contacting the RSS office so we can review the types of disaster coverage you may need to help you make the right choices for your home and family.
What Is a Catastrophe and What Does Insurance Cover?
According to the Insurance Information Institute (III), a catastrophe is an unusually severe natural or man-made disaster that results in potential insurance claims in excess of $25 million. While there are several different types of insurable catastrophes, not all of them require separate coverage. Some are included in a homeowners, renters or auto policies, or can be added as a rider attached to an existing policy.
Disasters that can be covered by insurance include:
- Hurricanes/tropical storms: To get coverage for these storms, you typically need to get a separate policy or a rider on your homeowners insurance, especially in certain high-risk areas.
- Earthquakes: Earthquake insurance is a separate coverage in high-risk areas along fault lines, generally in California, Alaska and Hawaii.
- Tornadoes/Windstorms: You may want windstorm insurance if you live in the Great Plains and the central states area known as “Tornado Alley.” This coverage is typically a part of a homeowner’s policy.
- Hailstorms: Hail damage is usually covered in a common homeowners or auto policy; coverage of hailstorm damage on a car can be handled through comprehensive coverage if it’s in force at the time of the storm.
- Fires and Wildfires: Forest or brush fires are catastrophe events, but fires that burn down a house or destroy a car can be covered as part of a homeowners or an auto comprehensive policy. A fire intentionally set by the home or car owner is excluded from coverage.
- Floods: Flood insurance is a separate policy for homes, usually applied to those who live on a flood plain. Flood damage can be part of a comprehensive policy on a vehicle.
- Tsunamis: Coverages for giant waves and related flooding are typically seperate from your homeowners policy and only available in high-risk areas along coastlines or on islands like Hawaii.
- Acts of terrorism: Damage from these events may be included in your homeowners insurance, but some policies exclude these catastrophes and require separate coverage.
- Volcano eruptions: You would need to purchase this as endorsement separately, though fire coverage in your home insurance can typically cover a portion of the loss.
It is important to know which types of disasters your homeowners or renters policy covers, and which require a separate policy. As an example, your home insurance may provide coverage against wind damage, but not for damage from flooding.
Predicting exactly what disasters you may need to prepare for and deciding whether you need catastrophe insurance is complicated. You can start with the following questions:
- Do you live in an area that is at high risk of tornadoes?
- Are you in a coastal region at risk for tropical storms, flooding or tsunamis?
- Do you live on a flood plain and does your community participate in the National Flood Insurance Program?
- Is your home near a forest or dry desert brush?
- Do you live on or near fault lines?
Knowing these facts about your home and geographic area is an important first step to finding the right insurance coverage to protect your home. Contact our office today so we can help you determine whether you need coverage above and beyond your standard homeowners, renters and auto policies.