Catastrophe Insurance FAQ

Catastrophe Insurance 101

(Everything you need to know - and more)

Q. What Is Catastrophe Insurance?
Q. What Does Catastrophe Insurance Cover?
Q. How Does Catastrophe Insurance Work?
Q. Do I Need Catastrophe Insurance?
Q. Where Can I Get Catastrophe Insurance?
Q. How Much Does Catastrophe Insurance Cost?
Q. What Is Earthquake Insurance?
Q. What Does Earthquake Insurance Cover?
Q. How Does Earthquake Insurance Work?
Q. How Much Is Earthquake Insurance?
Q. What Is Fire Insurance?
Q. Is Fire Insurance Included in Homeowners Insurance?
Q. What Does Fire Insurance Cover?
Q. How Much Is Fire Insurance?
Q. Is Fire Insurance Tax Deductible?
Q. What Is Flood Insurance?
Q. What Does Flood Insurance Cover?
Q. How Does Flood Insurance Work?
Q. How Much Does Flood Insurance Cost?
Q. How to Get Flood Insurance
Q. What Is Hurricane Insurance?
Q. What Does Hurricane Insurance Cover?
Q. How Much Is Hurricane Insurance?
Q. Does Hurricane Insurance Cover Hail Damage?
Q. What Is Terrorism Insurance?
Q. Does Insurance Cover Tornado Damage?
Q. What Is Windstorm Insurance?

What Is Catastrophe Insurance?

If you watch the news, catastrophes are beginning to seem commonplace. How do you protect yourself financially in the event of a major fire, tornado, severe hail damage, an earthquake, or even terrorism?

There are various types of catastrophe insurance available to cover different types of natural disasters as well as major damage caused by terrorism. 

Some coverage for these situations may be included in your homeowners insurance, but many of these events – such as flood and earthquake – are excluded. For those risks, you will need to buy separate coverage.

To get a better understanding of the risks in your area and the different kinds of catastrophe coverage available, contact a local independent agent in our network. 

One of these local agents can help you get your questions answered and will be able to provide competitive quotes from several insurance companies so you can find the right coverage for your needs.

What Does Catastrophe Insurance Cover?

The coverage you will get from your catastrophe insurance depends on the coverage type, the area in which you live, and what your insurance company covers.

Most homeowner policies typically exclude several types of natural disasters, such as earthquakes, other forms of earth movements such as sink holes and landslides, floods, septic system/sump pump overflows and backup, hurricanes and nuclear incidents.

Many homeowner policies cover only named perils, which can vary for each insurance carrier. Even an “all perils” policy may exclude some of these catastrophes or contain specific policy limits, so you may not be fully insured for a major loss.

Certain geographical areas in the U.S. are considered high risk for hurricanes, tornadoes, windstorms or floods. Special catastrophe insurance is available for specific natural disasters such as flood insurance, storm insurance for hurricanes and tornadoes, earthquake insurance and volcano insurance.

How Does Catastrophe Insurance Work?

When a catastrophe happens, you will need to work with your insurance company to determine if the damage is covered under your homeowners or other disaster coverage you may have, such as flood insurance or a special earthquake insurance policy.

As an example, if you reside in a flood plain, you may very well be required to carry flood insurance on your residence. Flood insurance is available through the National Flood Insurance Program (NFIP), or an agent in our network who participates in this program. 

In the event of a flood, you will work with your agent or insurance company to file a flood insurance claim. Depending on your specific circumstances and the coverage you chose, several scenarios could happen to you:

  • If you bought flood insurance to cover your home and personal property, you can receive compensation for both the damage to your residence and to your belongings.
  • If you bought flood insurance only to cover your home, you will not receive any compensation for damage to your personal belongings.
  • Because NFIP requires everyone to wait 30 days before claims can be paid out, if you did not purchase your flood insurance well ahead of flood warnings, you may not get any compensation for flooding damages. 

Be sure to talk with a knowledgeable, local insurance agent who can help you learn everything you need to know to properly protect your home, belongings and financial well-being.

Do I Need Catastrophe Insurance?

You may need catastrophe insurance if you live in any area which is prone to natural disasters. Every homeowners policy is different, and it is important to know what your policy does and does not cover. 

If you are a renter, consider buying renters insurance to cover your personal belongings, and any additional catastrophe insurance you may need if you live in an area prone to certain hazards that are not covered by your renters policy.

It is especially important to note that catastrophe policies often have time constraints on when you must buy a policy for it to be in effect for a covered event. For example, the NFIP has a 30-day waiting period before a flood insurance policy takes effect. 

To be able to file a claim on your hurricane insurance, you are required to have a hurricane insurance policy in place before the hurricane is given an official name by the National Weather Service.

Also, you may be legally required to buy the appropriate catastrophe insurance if you live in a designated high risk area such as a Special Flood Hazard area. You should also be aware that 25 to 30 percent of flooding occurs in moderate to low-risk areas.

The best approach to find the most suitable catastrophe coverage for your geographical area is to talk with a Trusted Choice independent insurance agent who can help you find the most suitable insurance coverage in your area.

Where Can I Get Catastrophe Insurance?

You may already have coverage for some types of catastrophes in your homeowners or renters insurance. 

If you are not happy with your coverage, or you want to find additional insurance that more closely matches your needs, contact an independent insurance agent in our network who can provide you with a range of policies and prices. 

These agents work for you, not an insurance company. They can scout for the right coverage for you, comparing quotes from several different companies.

How Much Does Catastrophe Insurance Cost?

The cost of catastrophe insurance varies as there are a number of variables that impact premiums, including the types of risks you face, the type of structure you live in and how much coverage you want.

For some types of catastrophe coverage, there are no additional costs over and above your homeowners insurance if the loss is covered under the policy.

Other disaster damage will require a specific policy that addresses each type of loss, such as flood, earthquake or tornado insurance. The costs of these specialized forms of insurance will also depend on the area where you live. A low risk area will cost less, but if you live in a high risk area you can expect to pay more.

Another variable that can significantly affect your premium is the deductible (the amount you pay out of pocket before your insurance kicks in). Another variable that can affect the cost of insurance is the type of coverage you need.

For example, with fire insurance, the amount you will pay depends upon whether you are buying “actual cash value” (market value of the home minus depreciation) or “replacement cost” coverage, which will cover complete rebuilding if needed. 

Actual cash value is generally more affordable coverage than replacement cost, but typically does not provide the funds to rebuild your home in the event that it is completely destroyed. 

What Is Earthquake Insurance?

Earthquake insurance is a form of property insurance that pays the policyholder in the event that an earthquake causes damage. Most ordinary homeowners insurance policies do not cover earthquake loss. 

If you are wondering whether you are at risk for earthquake damage and how to find the right coverage for your needs, contact a local agent in our network. These agents can often find policies at better prices than you would be able to find on your own.

What Does Earthquake Insurance Cover?

Interestingly enough, earthquake insurance covers things other than earthquakes, because the definition of an earthquake includes the shifting, rising or sinking of the earth. 

So, other things such as mudslides, mudflows, sinkholes, and tremors are often included in the definition of an earthquake and may be covered under your policy.

An earthquake insurance policy typically covers the dwelling, other detached structures located on your property and personal possessions. You should note that there may be policy limits or exclusions on some types of losses from earth movement, so be sure to review your needs and coverage with your agent.

How Does Earthquake Insurance Work?

Damage from earthquakes is often excluded from a standard homeowners policy. For this reason, earthquake insurance is a specialized policy that you must purchase separately. 

This form of insurance is designed to cover you if your home is damaged or destroyed as a result of an earthquake. The deductibles on the typical earthquake insurance policy range from 10 percent to 25 percent of the value of the policy coverage.

In the event of an earthquake or landslide, you will be able to file a claim with your insurance company. Damage to your home will be assessed by the company’s insurance adjuster. 

If you have “actual cash value” coverage, you would receive the cash value of the estimated repairs less the depreciated value, after you pay the deductible for your earthquake insurance policy. 

If you have “replacement value” coverage, you would receive the cash value of the estimated repairs to repair or rebuild your home, after you pay the deductible amount.

How Much Is Earthquake Insurance?

The cost of earthquake insurance varies widely from one insurance company to another, but rates are largely determined by the risks of your area. Other factors that will also determine your premium include:

  • The age and the type of home you own
  • Earthquake improvements or retrofitting you might make to your home to enhance its stability in an earthquake
  • Your home’s location relative to known fault lines
  • The type of soil on which your home was built
  • Your earthquake insurance policy deductible
  • Whether you buy “actual cash value” (depreciated) or “replacement cost” coverage

The actual cost of your insurance will be some percentage of your home’s value less a deductible. This is where all the cost variables figure in. If you live in a low-risk area, such as Minnesota, you might expect to pay about $.50 for every $1,000 in coverage, or about $150 annually. 

However, if you live in a high-risk area, such as Los Angeles, you might expect to pay on the order of $15 for every $1,000 of coverage. So for a $300,000 home your costs might be more on the order of $4,500 per year.

What Is Fire Insurance?

Fire insurance typically covers fire and smoke damage to your home, other structures on your property and personal possessions. Your fire insurance policy will typically also provide living expenses (for example, if you need to move into a hotel for an extended stay) while your home is being repaired or rebuilt. 

This form of coverage is typically included as a covered risk in your homeowners policy and covers most, but not all, types of fires that can damage or destroy your home. 

To ensure that you have adequate coverage for fire, be sure to consult a knowledgeable insurance agent who can sit down with you and review your coverage, as well as any gaps that may leave you exposed to loss.

Is Fire Insurance Included in Homeowners Insurance?

Fire insurance is usually included in your homeowners policy, but there are exceptions. One prime example of a time when you would not be covered for a fire is if the fire was caused by an earthquake.  Damage from an earthquake is often an exclusion on your homeowners fire coverage. 

It's a good idea to assess the collective value of your belongings, including any items of exceptional value, to be sure that you have the proper amount of coverage to protect your finances after a fire. You typically have several different options for ways to ensure that your personal possessions are covered. 

For example, you can increase the dollar amount of coverage for personal belongings or add specific endorsements to your policy for items of value such as jewelry, antiques and collectibles.

What Does Fire Insurance Cover?

Typical fire insurance coverage typically includes the repair or re-building of your home, additional structures on your property, personal possessions, clean-up and storage costs, and temporary repairs. Your fire insurance may also include living expenses for an alternative residence while your home is being repaired or rebuilt. 

However, you should be aware that every homeowners policy is different and it is important to understand your specific coverage and any exclusions listed in your policy. Your fire insurance will not cover fire that you intentionally cause, and will also typically not cover fire caused by your own personal negligence.

How Much Is Fire Insurance?

The cost of fire insurance depends on a range of factors. For example, you will have some basic coverage in your homeowners insurance, which takes into account the risks in your area and your home’s square footage. 

The amount you pay for insurance will go up if you want additional coverage for high value possessions, or you want full replacement value coverage vs. actual cash value coverage.

Additional factors which may affect how much you pay can also include:

  • Your home’s building construction
  • The age of the building
  • The location of your residence
  • Whether you or anyone in your family smokes
  • Whether you have sprinkler systems
  • Your home’s proximity to a fire department
  • Your home’s proximity to a fire hydrant 

Note that if you live in a rural area that is not serviced by a fire department, it may be difficult to buy fire insurance. An independent agent in our network can be an excellent resource for those who have difficulty finding insurance, or finding affordable coverage. 

These agents have access to several insurance companies and can quickly compare multiple options and quotes.  They can often help you get the right coverage at a price you can afford.

Is Fire Insurance Tax Deductible?

You may be able to deduct a portion of your loss on your taxes if you are not fully covered for fire loss under your homeowners insurance policy. This applies to most fires including those caused by natural disasters and losses occurring from an identifiable event that is unusual, unexpected or sudden.

Make sure to discuss everything with your tax professional.  Generally speaking, you first have to report your loss to your insurance company and file for a claim. You must then apply and file Federal Form 1040, Schedule A to claim your casualty deduction. 

There is a $100 deductible for any loss, and the loss must exceed 10% of your adjusted gross income (AGI). If your fire claim has been accepted by your insurer, you must also subtract any monies paid by the insurance company.

What Is Flood Insurance?

Flooding is not covered under a standard homeowners policy. Flood insurance is offered through the NFIP (National Flood Insurance Program), which is administered by FEMA, but you can get it through an insurance agent. Flood insurance in most cases will be required if your residence is located in a flood plain.

What Does Flood Insurance Cover?

Flood insurance covers flooding from overflowing rivers and creeks as well as tidal waters and flash floods.

Your flood insurance policy will cover you up to your policy limits, and may have certain exclusions. Be sure you carefully read your flood insurance policy, whether you purchase it through the NFIP or a private insurer.

Generally speaking, your coverage may include debris removal, structural repair to your home, attached and detached building structures (which may require separate policies), permanently installed fixtures, electrical repairs, and out of pocket expenses for temporary clean-up costs.

Contents coverage for your personal belongings may or may not be included. The contents coverage portion of the policy can be subject to limitations and offers some coverage for your appliances, furniture and personal possessions. It's a good idea to clarify this with your agent before you buy a policy.

How Does Flood Insurance Work?

Homeowners or renters who have purchased a flood insurance policy can file a claim with the insurance company. Contact your insurance company or agent to report a loss as soon as possible. 

Document your loss as thoroughly as you can; taking pictures of your belongings before and after a flooding event is a great way to document loss. Keep any and all out of pocket receipts for items or services you purchase to reduce or repair your loss.

How Much Does Flood Insurance Cost?

The cost of insurance depends upon the type of structure you live in and whether you live in a high, moderate or low risk flood area. The cost can be as low as around $129 per year if you live a low risk flood area, and somewhere between around $400 and $570 per year, on average, in a high risk flood zone.

How to Get Flood Insurance

Flood insurance is sold through insurance companies and independent agents. Your best bet is to contact a local independent agent in our network. One of these agents can help you determine if you need flood insurance and can assist you in finding a policy if you live in a flood zone.

What Is Hurricane Insurance?

Hurricane coverage is especially important for homeowners who live in risk-prone areas. Although most policies will cover wind damage and any water damage caused by the exposure of your home to the elements, it will usually not cover damage caused by any resulting flooding.

Some homeowners policies exclude hurricane damage altogether, especially in hurricane prone states, and you may be required to purchase a separate “comprehensive hurricane policy.” It’s very important to read your homeowners policy to determine whether hurricanes and other severe storms are covered.

What Does Hurricane Insurance Cover?

Coverage typically includes the house structure, and may or may not include detached structures, your personal possessions, and clean-up costs. Hurricane insurance may or may not include living expenses to help you pay for alternative living arrangements when your home is uninhabitable. 

Many policies also have a special separate hurricane deductible. This is different from your standard homeowners insurance deductible; typically it ranges from 3 to 5 percent of the policy value, but can also be a specific dollar amount you will need to pay if your home sustains hurricane damage.

Your coverage will include damage caused by wind or rain, but not flooding.  Flood damage will require separate flood insurance coverage.

How Much Is Hurricane Insurance?

Hurricane insurance may be included in your homeowners policy, and will address wind or water damage but generally excludes flooding. It’s important to review your policy, what it covers, and whether it is enough to cover rebuilding your home at current market value.

If you do buy hurricane insurance, the cost varies by region, insurance company, how much coverage you choose and your deductibles. Costs can vary wildly for comprehensive hurricane coverage, ranging anywhere from around $350 in a low risk area to as high as $20,000 for a luxury home in a high risk area.

To find the most suitable and affordable coverage, it is important that you compare costs with a Trusted Choice member agent who knows your needs and risks.

Does Hurricane Insurance Cover Hail Damage?

Most hurricane insurance and homeowners insurance cover hail damage, but the amount it will pay out will vary. One of the biggest factors taken into consideration is the age of your roof. 

Typically, roofs that are under 10 years old may be eligible for the full cost of repair or replacement and roofs that are 10 years or older may only be eligible for the depreciated value of the roof.

Mold caused by a damaged, leaky roof may be excluded under some homeowners policies, so you should always discuss this with an insurance agent and review your policy carefully.

What Is Terrorism Insurance?

Terrorism insurance is a form of insurance coverage that property owners can purchase to cover their potential losses and liabilities related to terrorist activities. Acts of terrorism are typically excluded under most homeowners policies and have to be purchased as separate coverage.

Homeowners wondering if they can or should buy terrorism insurance may be interested to know these facts:

  • Homeowners policies typically exclude war and acts of military force
  • Damage due to terrorism is typically not spelled out in a homeowners policy
  • If you have “named perils” coverage, you will only be covered for acts of terrorism if that peril is specifically named on your policy
  • If you have an “all perils” policy, terrorism is most likely covered unless it is specifically listed under the policy exclusions

To get a clear understanding of what your insurance covers, be sure to look carefully at your policy. If you want to enhance your coverage or are looking for a homeowners policy that provides coverage for terrorism, contact a local independent agent in our network. 

These agents have access to multiple insurance providers and can find the right coverage for your needs at the right price.

Does Insurance Cover Tornado Damage?

Tornado damage is typically covered under your homeowners policy, but every homeowners insurance policy is different.  It is important to know what your policy covers and what it excludes. If you live in a certain geographical area like "Tornado Alley," it may be a good idea to purchase tornado insurance separately.

What Is Windstorm Insurance?

Windstorm insurance is a specialized form of coverage designed for regions prone to windstorms, which are storms involving gale-force winds but very little rain. 

Windstorm damage may be excluded from a standard homeowners policy, or the homeowner may not qualify for a standard homeowners policy due to the home’s location or construction.

There are windstorm damage policies available that cover damage from windstorms, hurricanes, cyclones or tornadoes. The regions in the U.S. that may require this specialized form of windstorm insurance include coastal, Midwest states and southern states.

High winds cause more damage to U.S. homes annually than any other disaster.  Losses in property and crops from windstorms total roughly $379 million annually. Consult a knowledgeable insurance professional about the risks in your area, and how to prepare for them with the right coverage.

A local independent agent in our network, right in your area, can help you assess your property risks and find the right catastrophe insurance to protect your investment in your home and property.

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