Catastrophe Insurance FAQs

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?

Catastrophes include things like major fires, tornadoes, hurricanes, earthquakes, terrorism, and even very severe thunderstorms that create wind, hail, and lightning damage. While these are not everyday occurrences, we are all susceptible to different types of damaging events, depending on where we live. 

How can you recover financially if a catastrophic event damages your home or property? 

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, renters insurance, condo insurance, or landlord insurance, but other causes of catastrophic damage, such as floods and earthquakes, are typically excluded from these policies. Fortunately, you can likely purchase separate coverage for those types of events if you need it. 

To get a better understanding of the risks in your area and the different kinds of catastrophe insurance available, contact a local independent insurance agent. A local agent 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?

Catastrophe insurance is typically coverage that's part of your homeowners insurance. Exactly what type of catastrophe coverage you have depends on your insurance company, where you live, and what type of insurance policy you have.

Homeowners insurance policies typically exclude coverage for several types of natural disasters, such as earthquakes, other forms of earth movement, such as sinkholes and landslides, floods, septic system/sump pump overflows and backups, hurricanes, and nuclear incidents.

One type of policy, the HO2 or "named perils" policy, lists 16 covered perils, or causes of loss. If your home is damaged by one of the following and you have an HO2 policy, you’ll likely be covered for: 

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Damage caused by aircraft
• Damage caused by vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Volcanic eruption
• Falling objects
• The weight of ice, snow, or sleet that causes damage to a building
• Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
• Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system or an air conditioning or automatic fire-protective system
• Freezing of a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or of a household appliance
• Sudden and accidental damage from artificially generated electrical current 

Property damage caused by anything other than the 16 named covered perils will not be covered. 

An HO3 policy (or an "all-perils" policy), which is the most popular type of home insurance policy, covers most causes of property loss except certain perils that are specifically excluded from the policy. Both the HO2 and HO3 policies specifically exclude coverage for damage caused by: 

• Ordinance or law (e.g., demolition or construction required to bring your house up to code)
• Earth movement (e.g., earthquakes, sinkholes, landslides)
• Water damage due to floods, sewer back-ups, and water that seeps through the foundation
• Power failure
• Neglect
• War
• Nuclear hazard
• Intentional acts
• Governmental action (e.g., destruction, confiscation, or seizure of covered property by any governmental or public authority)
• Loss to property resulting from faulty zoning, bad repair or workmanship, faulty construction materials, and defective maintenance.

Clearly, even an “all perils” policy may exclude certain catastrophes or contain specific policy limits, so you may not be fully insured for a major catastrophe-related loss.

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

Flood insurance is available to everyone and is usually optional, unless you live in a high-risk flood area. In these areas, your mortgage lender may require flood 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 policy or any other disaster coverage you may have, such as flood insurance or a special earthquake insurance policy. You'll have to quantify the damage and file a claim. If the claim is approved, you'll be reimbursed for the costs of repairing or replacing your damaged property according to the specifics of your policy. 

For example, if you reside in a floodplain, you may be required to have flood insurance. Flood insurance is available through the National Flood Insurance Program (NFIP) and some private carriers. 

In the event of a flood, you will work with your insurance 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:

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

Do I Need Catastrophe Insurance?

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

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. 

Likewise, you can't purchase windstorm or hurricane coverage after a named storm (e.g., a tropical storm or hurricane) has been declared by the National Weather Service. 

And if you live in a Special Flood Hazard Area designated by the Federal Emergency Management Agency (FEMA), your mortgage lender will require you to purchase flood insurance. Keep in mind that doesn't mean you don't need flood insurance if you don't live in a high-risk area. In fact, over 40% of NFIP claims are from outside high-risk zones.

The best approach to find the most suitable catastrophe coverage for where you live is to talk with an independent insurance agent who can help you understand your risks. 

Where Can I Get Catastrophe Insurance?

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

If you are not happy with your coverage or you want to find additional insurance that more closely matches your risks, contact an independent insurance agent 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 factors that impact premiums, including the types of risks you face, where you live, 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. However, if you live somewhere that's at high risk for hurricanes, wildfires, or other covered natural disasters, your homeowners insurance may cost more to begin with than similar coverage would in a less risky place. 

Other catastrophic events require an extra policy or an add-on to your home insurance policy in order to cover the loss. This is where purchasing flood, earthquake, or windstorm insurance comes in. Of course, these policies come with additional costs, but similar to your home insurance policy, premiums will vary depending on a variety of factors specific to your home. 

Keep in mind that all of these policies come with a deductible, which is the amount you're required to pay out of pocket for a claim before your insurance coverage kicks in. The amount of your deductible has an impact on the cost of your policy. Choosing higher deductibles can help you lower your premiums. Just be sure that you can afford the deductible should you have to file a claim. 

Another variable that can affect the cost of home or catastrophe insurance is the type of coverage you purchase. For example, some policies pay claims based on the “actual cash value” of the home (market value of the home less depreciation). Others pay using a “replacement cost” coverage model, which will cover the cost to rebuild your home at today's prices without accounting for depreciation.

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

What Is Earthquake Insurance?

Earthquake insurance protects your home and belongings if they are damaged or destroyed in an earthquake. Standard homeowners, renters, landlord, and condo insurance doesn't cover earthquake damage. Instead, earthquake insurance is typically available as an endorsement to your home insurance policy or as a standalone policy, depending on your insurance company. 

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 independent insurance agent. 

What Does Earthquake Insurance Cover?

Earthquake insurance covers damage caused by an earthquake, a sudden and violent shaking of the ground resulting from movement of the earth’s crust. It typically provides dwelling and other structures coverage, personal property coverage, and loss of use coverage. 

Some earthquake insurance policies offer coverage for things like debris removal and emergency repairs to save your home from further damage.

What's more, some earthquake policies cover events other than earthquakes, including mudslides, mudflows, sinkholes, and tremors. 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 insurance agent. It's important to understand what your policy does and does not cover. 

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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 or policy endorsement that you must purchase separately. 

Earthquake insurance covers your home if it's damaged or destroyed as a result of an earthquake. After an earthquake or landslide damages your home, you must file a claim with your insurance company. The company’s insurance adjuster will assess damage to your home. 

You'll be reimbursed for the damage after you pay the deductible outlined in your policy. Deductibles for earthquake insurance are typically set at 10% to 25% of the coverage limit for your policy. That means that if you have a $250,000 earthquake insurance coverage limit with a 15% deductible, you’d have to pay $37,500 out-of-pocket before your coverage would kick in. There may be separate deductibles for your dwelling and contents coverage. 

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 cost coverage, you would receive the cash value of the cost to repair or rebuild your home at today's prices, after you pay the deductible amount.

How Much Is Earthquake Insurance?

The cost of earthquake insurance can vary widely depending on where your home is located, your insurance carrier, and the type and age of the structure that you are covering. 

For example, older buildings tend to cost more to insure than new ones, while wood frame structures are generally less costly to insure than brick buildings because they tend to withstand quake stresses better.

Here are some factors that impact the cost of earthquake insurance:

A local independent insurance agent can help you get earthquake insurance quotes from multiple insurance companies, so you can choose the policy that best fits your needs and budget. 

What Is Fire Insurance?

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

Coverage for fire damage is typically included as a covered risk in your homeowners insurance 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 independent insurance agent who can sit down with you and review your coverage, as well as any gaps that may leave you exposed to loss.

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Is Fire Insurance Included in Homeowners Insurance?

Fire insurance is usually included in your homeowners policy, but there are exceptions. For example, fire caused by an earthquake is likely excluded from coverage, because damage from an earthquake is a standard exclusion in home insurance policies. 

What Does Fire Insurance Cover?

Fire insurance typically covers repairing or rebuilding your home and any additional structures on your property, as well as repairing or replacing your personal possessions. It also typically covers clean-up and storage costs, temporary repairs, and temporary living expenses if you're displaced from your home after a covered loss. 

However, you should be aware that every homeowners policy is different, and it is important to understand your policy's specific coverage limits and exclusions. And keep in mind that your fire insurance will not cover any fire that you intentionally cause.

How Much Is Fire Insurance?

The cost of fire insurance depends on several factors that influence the cost of homeowners insurance. Your policy premiums are based on the risks you face, along with the amount of coverage you need for your dwelling and possessions. Costs are also higher if you choose replacement cost coverage (recommended) instead of actual cash value coverage. 

Some additional cost factors specifically related to your fire risk include: 

For help with pricing fire insurance, contact a local independent insurance agent. Local agents understand your risks and can help you find a policy that fits your needs and budget. 

Is Fire Insurance Tax-Deductible?

No, fire insurance and homeowners insurance for your primary residence are not tax-deductible. 

You may be able to deduct fire or landlord insurance premiums on any rental properties that you own. 

Be sure to speak with a tax professional to understand all of the tax implications of buying fire insurance.

What Is Flood Insurance?

Flood damage is not covered under a standard homeowners policy. Flood insurance is offered through the  National Flood Insurance Program (NFIP), which is administered by FEMA, and through some private insurers. An independent insurance agent can help you get NFIP or private flood insurance. 

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What Does Flood Insurance Cover?

Flood insurance from the NFIP consists of two types of coverage that reimburse you for physical damage to your property: building/structural coverage and contents coverage.

If you are a renter, you’ll only need to purchase contents coverage since your landlord will be responsible for fixing damage to the structure of the home. If you are a landlord, you will need much less contents coverage since your tenant will be responsible for covering their own belongings.  

For homeowners, policies can be purchased with limits up to $250,000 for the building and $100,000 for the building contents. These are typically purchased separately with separate deductibles.

• Building/structural coverage protects:
  • The insured building and its foundation
  • Electrical and plumbing systems
  • Furnaces and water heaters
  • Refrigerators, cooking stoves, and built-in appliances like dishwashers
  • Permanently installed carpeting
  • Permanently installed cabinets, paneling, and bookcases
  • Window blinds
  • Foundation walls, anchorage systems, and staircases.
  • Detached garages
  • Fuel tanks, well water tanks and pumps, and solar energy equipment
• Contents coverage protects:
  • Clothing, furniture, and electronic equipment
  • Curtains
  • Portable and window air conditioners
  • Portable microwave ovens and portable dishwashers
  • Carpets that are not included in building coverage
  • Clothes washers and dryer
  • Food freezers and the food in them
  • Certain valuable items, such as original artwork and furs, up to $2,500

You will want to buy enough coverage in each category to suitably cover your property.

Flood insurance from private carriers may offer additional coverage options. 

 A local independent insurance agent can help you find flood insurance.

How Does Flood Insurance Work?

If your home or belongings are damaged by flooding, you'll need to understand how your flood insurance policy works so you can be appropriately compensated for your losses. Here's a summary of how flood insurance works after a loss, according to the NFIP:

Start a Claim

• Report your loss immediately to your insurance agent or carrier. 

Prepare for Your Inspection

• An independent adjuster will be assigned to your claim. 
• The adjuster will inspect your property, documenting flood damage and recording floodwater levels. 
• Before the adjuster arrives, and as soon as possible after the flood, take photos and videos of your flood-related damage. 
• Take action to minimize the growth and spread of mold. The Standard Flood Insurance Policy (SFIP) will not cover mold damage if you fail to take reasonable action to prevent the growth and spread of mold.

Work With Your Insurance Adjuster

• Your insurance adjuster will explain the claims process, inspect your property, discuss your policy and coverage limits, and submit a recommendation regarding your loss to your insurer. 

Document Your Loss and Receive Payment

• Your adjuster will provide you with a repair estimate that includes the flood damage observed at the time of the initial inspection, based on current repair costs in your area. 

Make Repairs

• Work with reputable contractors to complete repairs. 

Keep in mind that it can take four to eight weeks before a standard policy claim is finalized and paid. The claim payment check will be made out to you and, if applicable, your mortgage company/lender. Any denials of coverage can be appealed within 60 days. 

One more thing to keep in mind after you've purchased a flood insurance policy: there is a 30-day waiting period after your date of purchase for your flood insurance to go into effect. There are a few exceptions to this rule, which you can learn more about when talking to a local independent insurance agent. 

How Much Does Flood Insurance Cost?

Premiums for flood insurance are based on:

• Flood risk for your property (your flood zone)
• The type of coverage you purchased (just building coverage or building and contents coverage)
• The deductible and the amount of coverage you need
• The location, design, and age of your home
• The location of your home’s contents 
• Whether or not your house has a basement

Your unique premium will be calulated based on these factors. Very simply, if you live in a community with low flood risk, you'll pay less than someone who lives in a high-risk area. Currently, the average cost of flood insurance in the U.S. is around $870 per year. 

How to Get Flood Insurance

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

What Is Hurricane Insurance?

Hurricane insurance covers property damage caused by wind and water associated with a hurricane. Typically,  a combination of homeowners insurance and flood insurance provides protection for some of the damage caused by a hurricane. 

Wind damage is usually a covered peril in a home insurance policy. Windstorm damage may be excluded from coverage in some high-risk states, however. In those cases, windstorm coverage can be added with a policy endorsement. Flood damage is always excluded from home insurance and flood insurance must be purchased separately. 

If you live in a hurricane-prone area, it’s important to understand how to cover both wind and water damage and any special terms or conditions that apply to your policies.

What Does Hurricane Insurance Cover?

Hurricane insurance should cover your dwelling, other structures on your property, and your personal possessions. It should also provide reimbursement for extra expenses if you're displaced after a covered loss. 

Your home insurance policy should cover windstorm damage caused by a hurricane, but some homeowners insurance policies in coastal areas may include a hurricane deductible or a wind deductible. A hurricane deductible is separate from your primary home insurance deductible, and is a percentage of your home’s insured value, rather than a pre-determined flat dollar figure. 

Hurricane deductibles apply only when your home has been damaged by a hurricane. They are typically 1% to 5% of the home’s insured value, so if your home is insured for $250,000 and you have a 2% hurricane deductible, you would have to pay the first $6,250 to repair damage to your home before your insurance coverage kicks in. 

Flood damage is never covered by homeowners insurance, even when the flooding is caused by a hurricane. You can get flood insurance offered by the National Flood Insurance Program (NFIP), a federal program created by Congress in 1968 to help homeowners protect themselves from the financial devastation of floods. 

An independent insurance agent can help you review your policies to make sure you have all of the wind and water damage coverage you need, especially if you live in an area that has a high risk for hurricanes. 

How Much Is Hurricane Insurance?

To get the best coverage for hurricane damage, you'll need a combination of homeowners insurance and flood insurance. The cost of insuring your unique home will depend on many factors like its size, its age, its location, and more. 

Homeowners insurance and flood insurance in hurricane high-risk zones tend to be some of the most expensive in the nation.

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Does Hurricane Insurance Cover Hail Damage?

Most homeowners insurance policies cover hail damage that results from a hurricane. The payout you receive, however, may depend on 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:

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 insurance agent. 

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?

Tornadoes are generally covered under homeowners insurance policies and do not require a separate endorsement or rider. 

Policyholders in some states may find that their policy includes a wind/hail deductible. These are special deductibles that are triggered if your home sustains tornado damage or when hail, wind-driven rain, or other similar storm damage occurs. Wind/hail deductibles are separate from your policy’s main deductible, and may be a flat dollar amount or a percentage (e.g., 2%) of your policy’s dwelling coverage limit. 

Wind/hail deductibles are most common in places like Tornado Alley (Kansas, Nebraska, Iowa, Oklahoma, and northern Texas), as well as parts of the Great Plains and the Midwest.

When you purchase a homeowners insurance policy, be sure to ask your independent insurance agent if it includes a separate wind/hail deductible and how it works. 

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What Is Windstorm Insurance?

Coverage for damage caused by high winds is usually included in homeowners insurance policies. But if you live in a high-risk area (such as a coastal area that's at risk for tropical storms and hurricanes, or areas that are considered to be in Tornado Alley), your home insurance policy might exclude windstorm coverage. In these cases, you can obtain windstorm insurance by purchasing an endorsement or rider that adds the coverage to your home insurance. If that's not available, you may be able to purchase standalone windstorm insurance from a specialty provider or a state high-risk pool. 

Windstorm insurance usually covers physical damage to your dwelling and your personal belongings inside the home. It also typically covers other detached structures on the property (e.g., garages or sheds). 

Windstorm coverage may also cover temporary relocation costs if the wind damage makes your home uninhabitable.

Keep in mind that some states, like Florida, impose a moratorium on buying new homeowners insurance or wind insurance as a new storm approaches. You'll need to be prepared with the right coverage well before a storm threatens.

An independent insurance agent 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.