Are You Covered for the Next Natural Disaster?

Make sure you have the right insurance to protect you from nature’s wrath.

Federal weather forecasts have predicted a “near normal” number of hurricanes for the season that ends November 30. That’s small consolation, though, if you find yourself in the path of one of the nine to 15 named storms predicted to form in the Atlantic this year. And elsewhere in the U.S., other types of natural disasters, from wildfires to floods, continue to inflict billions of dollars in damage to homes and businesses.

You can’t control Mother Nature, but you can protect your property. Start by understanding what your homeowners insurance will—and won’t—cover.

Damage caused by wind, wind-driven rain, and water that comes in your home through the roof, windows or doors is usually covered by your homeowners insurance policy. But your policy won’t cover water that comes from the ground up. For that, you need flood insurance. You should consider purchasing this insurance even if you don’t live in a designated flood zone, says Mark Hanna, of the Insurance Council of Texas.

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“Everyone should consider flood insurance, unless they’re living at the top of a hill,” Hanna says. Even if you’ve escaped flooding in the past, “there are so many different ways your home can flood,” he says. “Your neighbors could make changes to their landscaping and the next torrent of water could come right toward your house.”

You can buy insurance from the Federal Emergency Management Agency’s National Flood Insurance Program. The average cost is $699 per year, but higher-risk areas can cost much more (see (opens in new tab) for details). There’s a 30-day waiting period for NFIP coverage to take effect, so don’t wait for the water to start rising before you purchase a policy.

The maximum amount of coverage you can buy from the NFIP is $250,000 for your dwelling and $100,000 for the contents of your home. If your home is worth much more than that, talk to an insurance agent about private coverage. Private policies tend to have higher limits and may cost less than NFIP coverage, depending on where you live.

Coming up short. Most homeowners policies cover damage from tornadoes and wildfires (but not earthquakes, for which you need a separate policy). Still, your insurance may not cover the cost of rebuilding your home. For that, you’ll probably need extended replacement-cost coverage, which typically pays 25% to 50% above your policy’s limits. The extra coverage can protect you from big increases in the costs of labor and materials after a disaster.

That’s what happened after last year’s wildfires on the West Coast, says Derek Ross, an independent insurance agent who had to evacuate his Oak Park, Calif., home during last November’s wildfires. (His home wasn’t affected, but some nearby properties were destroyed.) “There is a limited number of contractors when you have big disasters,” he says. “On the West Coast now, the costs to rebuild are exorbitant.”

As far as the contents of your home are concerned, an inventory of your belongings will speed up the claims process. A smartphone app such as Sortly will help you create an inventory. Or, you can conduct a room-by-room narrated video of your belongings. Keep a record of serial numbers for appliances and electronic equipment. Don’t overlook offsite belongings, such as items kept in a storage facility, because they’re usually covered by your homeowners insurance, too.

Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.