When purchasing a home, protecting your investment is one of the most important steps you can take. Standard homeowner’s insurance provides protection from many risks but often excludes two significant threats—floods and earthquakes.

In areas prone to these natural disasters, securing flood and earthquake insurance is essential for complete coverage. This guide explains the details of flood and earthquake insurance, what each policy covers and does not cover, and how to determine whether you need these policies when buying a home.

What Is Flood Insurance?

Flood insurance is a specialized policy designed to protect homes from damage caused by flooding. It covers water damage due to external factors, such as heavy rain, storm surges, melting snow, or overflowing rivers. Unlike standard homeowner’s insurance, which excludes most flood-related damage, flood insurance is specifically tailored for this type of disaster.

Flood insurance policies are typically available through the National Flood Insurance Program (NFIP), which is a government-backed program, or through private insurers. For homeowners in high-risk flood zones, lenders often require flood insurance as a condition of the mortgage.

What Does Flood Insurance Cover?

Flood insurance generally provides two types of coverage:

1. Building Property Coverage: This covers the physical structure of your home, including the foundation, electrical and plumbing systems, HVAC equipment, and built-in appliances like water heaters and furnaces. Coverage also extends to structural elements such as walls, staircases, and permanently installed carpeting or paneling.
2. Personal Property Coverage: This protects your personal belongings inside the home, such as furniture, electronics, clothing, and smaller appliances. Personal property coverage is typically limited, with higher-value items (e.g., art, jewelry) needing additional insurance.

For most homes, flood insurance under the NFIP offers coverage limits of up to $250,000 for the building and $100,000 for personal belongings. If additional coverage is needed, homeowners can explore private insurance options that may offer higher limits and more comprehensive protection.

What Isn’t Covered by Flood Insurance?

It’s important to note that flood insurance does have its limitations. Certain types of damage are excluded from coverage:

• Mold and Mildew: Damage from mold or mildew that results from a flood may not be covered unless you can demonstrate that it occurred due to the flood and was not preventable.
• Landscaping and Outdoor Property: Damage to landscaping, fences, decks, patios, or swimming pools is typically excluded from flood insurance coverage.
• Vehicles: Damage to vehicles caused by flooding is not covered by flood insurance. This would be covered under your auto insurance’s comprehensive policy.
• Temporary Housing: If your home becomes uninhabitable after a flood, flood insurance does not typically cover the cost of temporary housing. This type of coverage would require an additional policy or rider.

How Do You Know If You Need Flood Insurance?

To determine if you need flood insurance, you first need to assess your home’s flood risk. FEMA provides flood maps that classify areas based on their likelihood of flooding.

Homes in designated high-risk flood zones (known as Special Flood Hazard Areas, or SFHAs) are required by law to have flood insurance if they have a federally backed mortgage. However, homes outside these areas can still flood, so flood insurance may still be advisable even if it’s not required by your lender.

Another factor to consider is your proximity to water bodies, drainage systems, and the flood history of your area. Additionally, climate change has made flooding more unpredictable, making flood insurance a critical consideration for any homebuyer.

What Is Earthquake Insurance?

Earthquake insurance is designed to cover damages caused by seismic activity, such as ground shaking, soil liquefaction, and landslides that result from earthquakes. Like flood damage, earthquake damage is not covered under standard homeowner’s insurance policies, which makes earthquake insurance necessary for homes in regions with a high seismic risk. Earthquake insurance policies vary by provider but generally cover the costs of repairing or rebuilding your home after an earthquake.

What Does Earthquake Insurance Cover?

Earthquake insurance typically includes three types of coverage:

1. Dwelling Coverage: This covers the cost of repairing or rebuilding your home’s structure after earthquake damage. It includes coverage for the foundation, walls, and the frame of the home. Damage to attached structures like garages may also be covered.
2. Personal Property Coverage: Similar to flood insurance, earthquake insurance also covers your personal belongings that are damaged or destroyed during an earthquake. This includes items like furniture, electronics, and household goods.
3. Loss of Use Coverage: This helps pay for temporary housing if your home becomes uninhabitable after an earthquake. It may also cover additional living expenses like food and storage while your home is being repaired.

One key difference between earthquake insurance and other types of policies is the deductible. Earthquake insurance often uses a percentage-based deductible, which means that the amount you pay out of pocket before coverage kicks in is a percentage of the insured value of your home. This percentage can range from 5% to 25%, which could result in significant costs depending on the value of your home.

What Isn’t Covered by Earthquake Insurance?

Earthquake insurance, like flood insurance, has several exclusions that homeowners need to be aware of:

• Pre-Existing Damage: Any damage to your home that existed before the earthquake is not covered.
• Fire Damage: Fires caused by earthquakes are not typically covered by earthquake insurance, though fire damage may be covered under a standard homeowner’s policy.
• Land Movement: Damage to land, such as sinkholes or landslides, is generally excluded from earthquake insurance. Land movement must be specifically caused by the earthquake for coverage to apply.

How Do You Know If You Need Earthquake Insurance?

Assessing your need for earthquake insurance involves understanding your home’s seismic risk. The U.S. Geological Survey (USGS) provides seismic hazard maps that show areas with the highest risk of earthquakes.

If your home is located in an earthquake-prone area, such as California or the Pacific Northwest, earthquake insurance is highly recommended. Even homes located in moderate-risk areas may benefit from earthquake insurance, particularly if local building codes are not designed to withstand seismic activity.

In some cases, mortgage lenders may require earthquake insurance, especially for homes in high-risk areas. However, even if it’s not required, homeowners should carefully evaluate their financial ability to rebuild in the event of an earthquake and consider the potential cost of earthquake insurance.

Additional Factors to Consider When Purchasing Flood and Earthquake Insurance

• Premium Costs: Flood and earthquake insurance premiums can vary significantly depending on your location, the construction of your home, and your home’s risk level. Homes in high-risk zones will typically see higher premiums.
• Building Age and Construction: Newer homes that meet updated building codes may have lower premiums. However, older homes, especially those not designed to withstand natural disasters, may face higher insurance costs.
• Bundling Policies: Some insurers offer bundled policies or discounts if you purchase multiple types of insurance. Consider discussing options with your insurance provider to ensure comprehensive coverage.

Bottom Line

Flood and earthquake insurance offers vital protection for homeowners, particularly in high-risk areas. These policies provide peace of mind that your home is financially protected from the devastating effects of natural disasters.

Floods and earthquakes may be unpredictable, but your financial protection doesn’t have to be. Having the right insurance coverage in place ensures that you’re prepared, no matter what nature throws your way.