Natural disasters are on the rise. Is your insurance coverage sufficient?

The frequency of hurricanes, wildfires, floods and storms not only threaten human safety, but also cause significant damage to buildings.

A recent study by Redfin real estate brokerage of the housing records and ClimateCheck data found that vacation homes are the most affected by natural disasters. Purchases of second homes with flood risk increased 45% between 2020 and 2021, while purchases of second homes with hurricane risk increased 40% during the same period.

Owners of condos and second homes may not fully understand homeowner’s insurance when it comes to natural disaster damage.

We asked two experts to provide advice on insurance and natural disasters: Bob Hertel, director of product development for Acuity Insurance in Sheboygan Falls Town, Wis., and Darren Wood, president of Recoop Disaster Insurance in Des Moines. All responded via email and their responses were edited.

Question: What are the most common natural disasters and how much do those disasters cost?

Hertel: Natural disasters vary depending on where you live. The average loan amount varies depending on the type of disaster. According to Acuity’s data, the average cost of a wind or hail claim is usually less than $15,000. However, wildfire claims are very expensive, often reaching hundreds of thousands of dollars.

Wood: The average exposure to natural disasters such as hurricanes, wildfires, earthquakes, earthquakes, gas explosions, winter storms and hurricanes is $54,000.

Q: Are most of these items covered by homeowner’s insurance?

Hertel: Damage caused by wind, hail and fire is often covered by standard homeowner’s insurance, including losses from wildfires and hurricanes. Damages caused by floods or landslides, such as earthquakes or landslides, are not covered by a homeowner’s policy. Special approvals can be added to a homeowner’s regular plan to protect against earthquakes or landslides. An insurance agent can provide you with flood insurance through the National Flood Insurance Program.

Wood: Yes, but there are gaps in coverage. For example, certain disasters like earthquakes and hurricanes are often not included in homeowner’s policies, so you may be on the hook to cover the damage yourself. Some common opportunities include lower cost of your roof, larger discounts for disasters such as hurricanes and the difference in your home’s appraised value versus market value that allows buyers to buy out of pocket. In addition, with general insurance, people can wait up to 30 days before they are paid after submitting a claim. That can feel like an eternity if your home is badly damaged or uninhabitable.

Q: What is the difference between market value, extended replacement and guaranteed homeowner’s insurance?

Hertel: When the cost of building materials and labor has skyrocketed recently, one important thing to consider is guaranteed replacement cost, which ensures you won’t be on the hook for the difference between your homeowner’s insurance limit and the actual cost of rebuilding.

Here is an example of the importance of replacement cost determination. Assume that a home is insured with a coverage limit of $550,000. The building was later destroyed by a hurricane. After the storm, building supplies and construction work are in short supply, resulting in a $1 million reconstruction cost to rebuild the same building. With the guarantee of the cost of restoration, the insurer will pay $ 1 million to rebuild the house; without a guaranteed cost refund, the homeowner may have to pay all or part of the $450,000 to rebuild.

Wood: Most policies add up to 125% of the home insurance premium. The average homeowner can be on the hook for up to 2 to 20% of their home’s value because these policies are based on market value, not replacement value, which we know is very high these days.

Question: Is it common for insurance to pay for temporary relocation if the home needs major repairs?

Hertel: Yes. A standard homeowner’s policy includes reimbursement for your home purchase if your home is uninhabitable due to a natural disaster. Depending on the damage, this may include short-term hotel stays or extended housing while your home is being repaired or rebuilt.

Question: Does umbrella insurance cover natural disasters?

Hertel: No, umbrella policies do not provide additional protection against natural disasters. An umbrella policy provides more coverage for personal injury or property damage that you cause to others.

In the event of a natural disaster, property insurance — not rental insurance — is required to cover the damage.

Q: What are some tips for homeowners around natural disasters and insurance?

Hertel: It’s important to make sure you understand what natural disasters are covered by your homeowner’s policy. If you live in an area prone to floods or earthquakes, you may need additional insurance coverage. It’s also important to check your policy limits, which determine how much your insurance will pay. An insurance agent can help you make sure you have the right coverage and limits.

Wood: Recoop Disaster Insurance is a multi-problem insurance policy that pays large sums (up to $25,000) following a natural disaster, including hurricanes (including hurricanes), wildfires, earthquakes, earthquakes, gas explosions, and cold weather. wind or dust. Your premium is based on the volume of your purchase and the level of risk in your area. Recoop Disaster Insurance is not intended to replace a homeowner’s or renter’s policy; it’s designed to work with and exists to fill the gaps left by many homeowners’ insurance policies after a natural disaster. When a disaster occurs, you reach out to Recoop directly to answer a few questions, provide photos of your home as proof of loss and review. If everything goes well, the payment will come within 24 to 48 hours after you approve the request.