What Homeowner’s Insurance Does and DOESN’T Cover


Heartbreaking images of homes being washed away in Japan’s deadly tsunami this month were a very visual reminder of just how destructive a disaster can be. While homeowner’s insurance is important to have in the face of disaster, the reality is that it only protects your home from windstorm damage—leaving it vulnerable to other major catastrophes like earthquakes and flooding.

Loretta Worters, vice president of the Insurance Information Institute, said nearly 98% of U.S. homeowners have the standard homeowner’s insurance coverage that is necessary to have when paying back a mortgage. Homeowners can purchase flood coverage separately through the National Flood Insurance Program, which protects homes for up to $250,000 externally and up to $100,000 for the contents. Worters said excess flood insurance for more expensive homes can be purchased on the regular market.

Depending on a homeowner’s location in the country, earthquake policies can also be purchased separately. The only type of disaster that is not covered by insurance is nuclear disaster, she said.

“Nuclear is like war, and they can’t insure a home for war,” she said. “It’s not anyone’s fault.”

Many homeowners opt to not get disaster coverage in addition to their homeowners’ policies, Worrters said. Only about 12% of homes in flood-prone areas have flood coverage nationwide, she said, and in earthquake-prone California the same percentage of homeowners buy earthquake insurance.

“They think it won’t happen,” she said. “It’s a sense of denial we all live in.”

Different risks apply to homeowners in different areas of the country, so it is important to assess your own risk before purchasing this additional coverage, Worters said. However every homeowner, location aside, should invest in flood insurance, she said.

“Flooding is something that can happen anywhere, anytime. It doesn’t matter if you’re in a flood zone or not,” Worters said.”

Insurance.com’s Senior Managing Editor Chris Kissell said right now many U.S. homeowners are reconsidering what their policy does and doesn’t protect them from, after seeing the destruction in Japan over the past two weeks.

“You need this insurance to cover yourself in case disaster strikes, just like if your house burns down you want the money to replace it,” Kissell said. “Disasters are just as devastating—without this insurance there is no one there to compensate.”

Regular homeowner’s insurance will run a homeowner around $800 annually, Worters said, while flood and earthquake insurance prices are reliant on a variety of factors including proximity to fault lines and the materials the home is made from. For quake coverage in lower-risk areas, a homeowner will pay between $300 and $500 annually. Flood insurance in low risk areas will cost a homeowner between $300 and $400 a year.

Homeowners can consider their home’s location in proximity to water, or a fault line to determine if purchasing additional coverage is necessary, Kissell said. However, he does advise it is better for a homeowner to be safe than sorry.

“A few hundred dollars (for insurance) is nothing compared to tens or hundreds of thousands of dollars in damage,” he said. “More than anything, it is to protect you from financial disaster that can alter the course of your life.”