Homeowners insurance is designed to provide financial protection for homeowners in the event of certain losses to their home or possessions. While standard homeowners insurance policies cover a wide range of perils, there are some things that are typically excluded or not covered. Two of the most common exclusions in basic homeowners insurance are flood damage and earthquake damage. Understanding what is not covered can help homeowners evaluate if they need to purchase additional insurance policies to get more complete protection for their home.
Flood Damage
One of the most significant exclusions in a standard homeowners insurance policy is flood damage. Homeowners policies do not cover any water damage that results from a flood, including damage from heavy or prolonged rain, overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters, or any other flooding event.
Some key facts about flood damage and homeowners insurance:
Flood damage is excluded even if the flooding is caused by a storm
Damage from heavy rains, storm surge, or overflowing rivers is considered flood damage even if it occurs during a hurricane or other severe storm. Since it results from flooding, it is not covered.
Only separate flood insurance covers flood damage
To get protection for flood damage, homeowners need to purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurance company. Homeowners policies will not cover any flood damage under any circumstances.
Most flood damage is not covered by disaster relief
Some people assume the government will provide assistance if flooding disasters occur. However, federal disaster assistance usually only covers damage that is uninsured. If homeowners do not have flood insurance, they cannot depend on disaster relief funds to repair and rebuild after a flood.
Homeowners in flood zones need flood insurance
Homeowners whose property is in a FEMA-designated high-risk flood zone are required to buy flood insurance if they have a federally backed mortgage. However, even properties outside of designated flood zones may be at risk. 25% of flood claims come from low-to-moderate risk areas.
| Location | Flood Insurance Requirement |
|---|---|
| High-risk flood zone (Zones A, AE, AH, AO, V, VE) | Flood insurance required for federally backed mortgages |
| Moderate-low risk areas | Flood insurance optional but recommended |
Earthquake Damage
Earthquake damage is another very common exclusion in basic homeowners insurance policies. Any damage caused by earth movement, including earthquakes, landslides, mudflows, and sinkholes, is generally not covered. Here are some key facts about earthquake damage coverage:
Most earthquake policies have a high deductible
Deductibles for earthquake coverage often start at 10% or 15% of the home’s insured value. With high deductibles, additional earthquake coverage may not be beneficial unless a catastrophic quake occurs.
Earthquake coverage may have a separate limit
Even if they add earthquake coverage, homeowners may see limits on the amount the policy will pay out. This means that major earthquake damage could exceed the coverage limit, leaving the homeowner to pay the difference.
Not all seismic activity is covered
Smaller seismic events like minor tremors may not meet the threshold to trigger earthquake coverage. Homeowners need to understand their policy’s definitions of what is considered earthquake damage.
Some states have higher risk
States like California, Washington, Alaska, and Utah have significantly more earthquake exposure based on fault lines and seismic history. Homeowners in these areas especially need to evaluate the cost vs. benefit of added coverage.
| State | Annual Earthquake Premium |
|---|---|
| California | $800-$1200 on average |
| Washington | $300-$700 on average |
| Utah | $200-$600 on average |
Other Common Exclusions
Beyond flood and earthquake damage, there are some other losses that homeowners insurance does not address:
Normal wear and tear
Damage from normal aging and deterioration of the home is not covered. This includes things like broken pipes or roof damage from age.
War and nuclear accidents
Damage from war, acts of terrorism, or nuclear accidents are typically excluded from homeowners policies.
Intentional loss
Damage that the policyholder causes intentionally will not be covered. Homeowners cannot file claims for fires they set or floods they create in their own home.
Government seizures
If the government seizes or confiscates the home for any reason, damage or loss of use is not covered.
Auto and aircraft accidents
Crashes involving vehicles or aircraft are not covered by homeowners insurance. Exceptions sometimes exist if an insured vehicle damages the home.
Add-On Options for More Coverage
While flood, earthquake, and certain other perils are not covered by standard homeowners policies, insurers do offer add-on options for more comprehensive protection:
Flood insurance
Separate flood insurance policies are available through FEMA’s National Flood Insurance Program or private insurers. Premiums are based on flood risk factors like property location and elevation.
Earthquake insurance
Earthquake coverage endorsements or riders can be added to homeowners policies for an additional premium, often with a higher deductible and coverage limits.
Water backup coverage
Backup of water and sewage from drains, sewers, or sumps can be covered by endorsement for around $50 per year.
Scheduled personal property
Expensive jewelry, collectibles, equipment, and other personal items can be scheduled individually to ensure adequate coverage.
Identity fraud expense
Covers costs related to identity theft, like lawyer fees, lost wages, and fraudulent debt removal, often for around $25-50 per year.
Key Takeaways
– Flood damage and earthquake damage are two of the most common exclusions on basic homeowners insurance policies. These perils must be covered separately.
– Homeowners should understand their vulnerability to floods and earthquakes and weigh the cost vs. benefit of purchasing additional coverage.
– Policies for flood and earthquake tend to have high deductibles and coverage limits. Major disasters may exceed limits, leaving homeowners with unpaid losses.
– Beyond floods and earthquakes, standard policies also exclude normal wear and tear, war, nuclear accidents, intentional damage, and auto/aircraft crashes among other perils.
– Add-on endorsements can provide protection for many uncovered losses like water backup, identity fraud, and valuable personal items. Review options with your insurance agent.
Conclusion
While homeowners insurance provides valuable protection for a home’s physical structure and possessions, there are some key exclusions like flood and earthquake damage. Being aware of what is not covered under a standard policy allows homeowners to make informed decisions about purchasing add-on coverage to fill gaps and get more complete protection. Discussing uninsured risks and optional endorsements with an insurance agent can help homeowners tailor a policy to meet their unique needs and tolerance for risk.