Should you Buy a Separate Flood and/or Earthquake Insurance Policy?

August 8, 2018

You buy homeowner’s insurance and you think everything is covered. Did you know that many policies don’t include coverage for flood or earthquake damages, though? Too many people find out the hard way, after they experience destruction. The last thing you want in the face of destruction is to find out that your coverage isn’t what you thought. Instead, you may want to buy separate policies or even riders to make sure you have protection.

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Who Needs Flood Insurance?

Floods are one of the most costly disasters that can occur to a home. While FEMA does have a flood zone map depicting the high-risk areas, even homes not in a high-risk area can experience flooding. If your home is located in a flood zone, you have no choice but to buy flood insurance. Your mortgage lender will require it.

If you aren’t located in a flood zone, it could be a good idea to carry coverage anyways. If you don’t have to use it, consider yourself lucky. If you do experience a flood, though, you won’t have to face the financial destruction that often comes along with flood damage.

If you think you will receive reimbursement from the federal disaster funds. While you may get some help, it’s usually in the form of a loan from the SBA. In other words, it’s not reimbursement, but rather a loan that you must pay back. The government just gives you the financial assistance necessary to get through the troubling time.

What Does Flood Insurance Cover?

Flood insurance typically covers flood damages that occur from a naturally occurring source and that affects at least two properties. Typically flood insurance will cover your home up to $250,000. If you purchase a rider to cover your personal belongings (which aren’t covered under standard flood insurance), you may receive up to $100,000 in coverage.

Who Needs Earthquake Insurance?

Even the best homeowner’s insurance policy won’t cover earthquake damages. You must buy a separate policy or add a rider/endorsement to your current policy for earthquake damages. If you live on the west coast, earthquake insurance is almost a necessity. Even if you don’t, though, you may be surprised to learn that you should carry earthquake coverage too.

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Because earthquake insurance can be costly, many homeowners don’t buy it. You may find the typical policy to run as much as 10% of your property’s value. At the very least, though, those living on the west coast should have some type of coverage.

What Does Earthquake Insurance Cover?

Earthquake insurance covers damages to your home, belongings, and additional living expenses, if you are displaced from your home. As is the case with any insurance, your coverage should cover the reasonable costs that occur as a result of your loss.

Care should be taken, though, as earthquake insurance does have loopholes. For example, if a fire starts in your home as a result of the earthquake, your homeowner’s insurance should cover that rather than the earthquake insurance. Earthquake insurance also doesn’t cover all of your personal belongings. The most commonly excluded items include:

  • Cars
  • Expensive belongings, such as jewelry or antiques
  • Fences
  • Pools

In addition, any water damage that occurs as a result of the earthquake won’t be covered. You would need a flood policy to cover it.

As you can see earthquake and flood insurance tend to go hand-in-hand. If you need earthquake insurance, you should probably consider flood insurance as well. If you need flood insurance, it’s up to you if you want to buy earthquake insurance too. Just know that your regular homeowner’s insurance will not cover damages from either issue.

It’s a good idea to review your coverage from time-to-time. This gives you a chance to reassess your needs. If the dynamic of your area changes a lot, you may find that flood or earthquake insurance is suddenly a necessity.

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