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Feb 28, 2024
Discover why gaps in homeowners insurance coverage leave us vulnerable to uncovered costs amidst increasing natural disasters. Learn about the common exclusions, the importance of additional coverage, and how to understand policy limits and deductibles to safeguard your home and assets.
Bridge Your Insurance Gaps: Here's what you should know
As natural disasters and severe weather are increasing and can happen at a moment's notice, it’s only natural we rely on our homeowners insurance policy to provide financial protection. Yet, gaps in coverage can oftentimes leave us vulnerable and left with uncovered costs.
With 70% of homeowner insurance claims coming from weather-related events, understanding these gaps is crucial for homeowners to ensure they are prepared for the unexpected. In this article, we delve into the common gaps in insurance coverage when it comes to disasters and what homeowners should be aware of to safeguard their homes and assets.
The Unpredictable Nature of Disasters and Severe Weather
Natural disasters such as hurricanes, earthquakes, floods, and wildfires can cause extensive property damage and financial loss. Homeowners frequently assume that their insurance policies will cover all damages incurred during such events. However, the reality is that standard homeowners insurance may not provide comprehensive coverage for certain types of disasters.
Exclusions in Standard Homeowner Insurance Policies
One of the primary gaps with insurance coverage is the things it doesn't cover. While homeowner insurance policies typically cover damages caused by fire, theft, and certain weather-related events like windstorms, be aware that other natural disasters often fall outside the scope of standard policies, leaving homeowners exposed.
Here are typical weather events not covered by standard homeowners insurance policies:
Floods
Earthquakes
Hurricanes
Wildfires
Importance of Additional Coverage
Homeowners should consider purchasing additional policies or that provide protection against specific types of disasters. For example, flood insurance is essential for properties located in flood-prone areas, as standard homeowners insurance does not cover flood damage. Similarly, earthquake insurance is crucial for homeowners in seismically active regions, as earthquakes are typically excluded from standard policies.
Make sure you understand the specific disasters that could affect your area by checking your risk of disaster hotspots. It's essential to get the right coverage for the weather events you’re up against.
Understanding Policy Limits and Deductibles:
Even when homeowners have additional coverage for disasters, it's essential to understand the policy limits and deductibles associated with these policies.
Policy limits refer to the maximum amount that an insurance company will pay out for a covered loss.
Deductibles are the out-of-pocket expenses that homeowners must pay before their insurance coverage kicks in. Homeowners should review their policy limits and deductibles carefully to ensure they have adequate coverage in place.
The Importance of Regular Reviews:
As homeowners' circumstances and risks change over time, in fact, 37% of homeowners haven’t updated their home insurance policy since purchasing their home. It's crucial to conduct regular reviews of their insurance coverage to ensure it remains up to date.
Factors such as home renovations, changes in property values, and updates to local building codes can all impact insurance needs. By staying proactive and regularly reviewing policies, homeowners can identify any gaps in coverage and make necessary adjustments.
Understanding why your insurance rate may increase:
As homeowners purchase insurance as a way to reduce the risk of financial loss, insurance companies do the same by buying reinsurance. Think insurance for insurance companies.
And with an ever-changing climate, these reinsurance companies have increased their rates they charge insurance companies, ultimately passing these increased rates down to the policy holder. So, when an insurance company has to pay for natural disasters in certain regions, it can influence the insurance rates for all policyholders, particularly those residing in states prone to more severe weather events.
While it’s essential to stay informed about your property and homeowners' insurance, natural disasters can still affect everyone. Whether you're seeking tools to prepare your property or recovering from the unexpected, Dorothy is here to guide you on your climate journey, offering support and tools every step of the way.
About the Author
Dorothy is the industry-leading climate benefit network, helping homeowners and businesses prepare and protect their property before, during, and after a weather event. Our team comprises compassionate individuals deeply committed to addressing climate challenges, with expertise spanning various fields such as urban planning, climate-focused technology, property recovery, and related industry topics. Together, we work to empower our communities and address the impact of climate-related events.
Sources
"Weather-Related Homeowners Insurance Claims" - Insurance Information Institute. Available at: [https://www.iii.org/article/weather-related-homeowners-insurance-claims](https://www.iii.org/article/weather-related-homeowners-insurance-claims).
"Understanding Homeowners Insurance: What's Covered, What's Not" - National Association of Insurance Commissioners. Available at: [https://www.naic.org/consumer_homeowners.htm](https://www.naic.org/consumer_homeowners.htm).
"Why Homeowners Insurance Rates Are Increasing" - Consumer Reports. Available at: [https://www.consumerreports.org/homeowners-insurance/why-homeowners-insurance-rates-are-increasing/](https://www.consumerreports.org/homeowners-insurance/why-homeowners-insurance-rates-are-increasing/).
"Homeowners Insurance: The Importance of Regular Reviews" - American Family Insurance. Available at: [https://www.amfam.com/resources/articles/at-home/reasons-to-review-your-homeowners-insurance-policy](https://www.amfam.com/resources/articles/at-home/reasons-to-review-your-homeowners-insurance-policy).
"The Impact of Climate Change on Insurance Rates" - Climate Reality Project. Available at: [https://www.climaterealityproject.org/blog/impact-climate-change-insurance-rates](https://www.climaterealityproject.org/blog/impact-climate-change-insurance-rates).
