Is Your Home Insured for Catastrophe?

Knowing what coverage you have and don't have will give you peace of mind and possibly save you from financial ruin. Shutterstock

Insurance is meant to protect you from losses. So when you buy your home insurance policy, you think you’re safe from losses. But that, however, may not be the case. Many exclusions can leave you without insurance when you need it most.

What, then, are these exclusions? Knowing what coverage you have and don’t have should give you peace of mind, and possibly save you from financial ruin. There are several exclusions you need to know about and find coverage for, if necessary.

Assessing Your Homeowner’s Insurance Policy

It’s imperative you read through your insurance policy and find the exclusions. These are the perils and financial losses your policy won’t cover. A peril is an unpredictable event such as a wildfire or earthquake. One is usually covered, and the other is not.

You can often override and protect yourself from these exclusions by purchasing endorsements. An endorsement, sometimes called a rider, is an add-on policy that will cover the exclusion. It is often bought through another insurance company, like surplus lines.

Excluded Catastrophic Coverage

When disaster hits, your first concern is your family’s safety. Once the dust has settled, it’s time to call the insurance company to file a claim. Many are surprised by what is not covered. Not having these catastrophic claims covered can lead to financial hardship and possible bankruptcy.

Flood Not Covered by Insurance

Floods are a common disaster and don’t necessarily always occur in a flood zone. However, floods are excluded from home insurance policies.

Most people in the coastal regions purchase flood insurance, but those who live inland usually neglect this coverage.

For example, most residents of Asheville, North Carolina, who were victims of Hurricane Helene’s flood disaster didn’t have flood insurance. These residents now face financial hardship or even bankruptcy.

If you don’t have flood insurance, call your insurance agent or company and inquire whether the insurer sells it. The company will write insurance directly with the National Flood Insurance Program (NFIP). The NFIP partners with more than 50 private insurance companies. It can also sell flood insurance directly to you.

If your insurance company doesn’t sell flood insurance, this NFIP insurance provider locator will help you find an insurer near you.

But be aware: You must purchase flood insurance ahead of time. According to the Federal Emergency Management Agency, there is typically a 30-day waiting period before the NFIP policy goes into effect.

Earthquakes and Mudslides

Earth movement is excluded from a homeowner’s policy. You’ll need to buy earthquake insurance. Your insurance agent can help you find and purchase this endorsement. Besides private insurance, if, say, you live in California, you can purchase this insurance from the California Earthquake Authority.

Earthquake insurance has high deductibles. According to the National Association of Insurance Commissioners, the deductible is between 10 percent and 20 percent. That means if you own a $300,000 house, your deductible at a minimum will be $30,000.

Mudslides and landslides are not covered under your standard homeowner’s policy. This often shocks victims of these perils. Even if you have earthquake insurance, you’re still not covered for mudslides and landslides.

Landslides and mudslides are caused by erosion or water accumulation that destabilizes the land. Earthquakes are sudden events that are caused by seismic activity.

If you want coverage for these perils, you'll need to purchase a mudslide endorsement. Another option is to buy a difference-in-conditions policy. This type of policy covers landslides and mudflows, floods, and earthquakes.

This is found through surplus lines. Check with your insurance agent or The Insurance Marketplace for coverage. It is usually a pricey insurance.

Although your home isn’t covered, your car may be. If you bought comprehensive insurance on your vehicle, it is likely covered for earthquake- and flood-caused damage.

Wind Damage in High-Risk Storm States

Although wind damage is usually covered under a standard homeowner’s policy, there are some counties in specified states where this coverage is excluded, including in Alabama, Florida, Louisiana, Mississippi, North Carolina, South Carolina, and Texas.

These coverages can be added as an endorsement through surplus lines. Check your policy and confirm that you have this coverage.

Sewer Backup Not Covered

A homeowner’s policy doesn’t automatically cover a sewer backup, but many insurance companies provide this endorsement. If you opt to have this coverage, two types are provided.

A heavy downpour that causes your sump pump to fail and damages a finished basement would be covered under the endorsement, but not by the standard insurance policy.

If tree roots grow into the septic line outside your house and cause a backup that floods your home, this would be covered under an endorsement—but, once again, not by your standard policy.

Catastrophe Versus Hazard Insurance

Catastrophe and hazard insurance cover different types of risks.

Hazard insurance covers volcanic eruptions, tornadoes, and lightning.

Catastrophe insurance covers other events such as natural and unnatural disasters. These were mentioned previously.

Hazards are covered under your homeowner’s policy, but catastrophes are not. Know the difference so you can properly insure your home.

Read Your Insurance Policy

Not reading your insurance policy and knowing the exclusions can be an expensive mistake. Most coverages, such as flood insurance, have a waiting period. You can be taken by surprise and not be able to do anything about it.

If you’re not sure, contact your insurance agent or insurer and have them go over your policy with you.

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