You can recover from a disaster more easily if you have the right insurance. You want insurance that will give you the most money to help repair or replace property that’s damaged by a disaster. It’s especially important to get insurance coverage for natural disasters that are likely to occur in your area, like floods or fires.
This page explains what insurance does and the different types. It also explains important insurance-related steps to take before and after a disaster. Following these steps should make it easier to get payments from your insurance provider after a disaster.
Federal Aid for Disaster Recovery
You may be able to get financial help from the federal government to recover from a disaster. This is possible whether you have insurance or not. But it’s important to know that:
Federal aid is only available when the president of the United States declares a major disaster occurred in a certain place. This doesn’t always happen. For example, more than half the time, a community where a flood occurred is not declared a federal disaster area.
Federal aid doesn’t cover all your costs. You might need more money to fully repair the damage. You might even need to repay the federal aid. For example, a Small Business Administration (SBA) loan must be repaid with interest.
You can’t get federal aid if your insurance covers your repair costs fully. But you might qualify for federal aid if the insurance company gives you less money than you need.
Learning Basic Insurance Terms
It helps to understand insurance terms and concepts. These terms include “premium,” “deductible,” and “coverage.”
The “premium” is the amount of money you pay each year for insurance. Generally, you make monthly payments.
A “deductible” is the amount of your own money you must spend to fix or replace damaged property before the insurance company will give you money for repair or replacement. For example, say you have a $1,000 deductible and $2,000 in damage. You pay the first $1,000 with your own money (“out of pocket”) before the insurance company provides any assistance. Your deductible affects how much you pay for your premium.
With a higher deductible, you pay less for your premium. However, you agree to pay more out of pocket for damage.
With a lower deductible, you pay more for your premium. However, you pay less out of pocket for damage.
“Coverage” is the highest amount of money the insurance company will give you to help you repair or replace damaged property. For example, if your coverage is $20,000 and the cost of repair or replacement is $25,000, you still have to pay $5,000 of your own money to cover the cost of the repair or replacement. You pay a higher premium for higher coverage.
Here’s an example. Say you buy a flood insurance plan with a $104 premium, $1,000 deductible, and $20,000 in coverage:
A flood causes $30,000 in damage to your property.
Because of your deductible, you spend $1,000 of your own money before the insurance company helps pay.
The insurance company pays the next $20,000 in costs.
That leaves $9,000 still to pay. That money comes from you.
In total, you spend $10,000 for the cost of repair. The insurance company pays $20,000.
What Is Property Insurance?
Property insurance is an agreement that says how an insurance company will help with costs if a homeowner’s or renter’s property is damaged, destroyed, or stolen.
As the homeowner or renter, you agree to pay the company a premium. In return, the insurance company agrees to help you pay to repair or replace your damaged property when something unexpected happens. For example, a fire or storm might damage your property, or a burglar might steal your belongings.
The financial assistance the insurance company provides may be much more than the yearly premium you pay. In the end, you can save money if you have property insurance and a disaster damages your property.
There are two basic types of property insurance:
Homeowners insurance. This insurance policy covers damage to the structure of your home. It covers important items like air conditioners, furnaces, and water heaters. It also includes coverage for damage to personal belongings in the home. This personal property includes televisions, computers, washers, dryers, furniture, and clothing.
Renters insurance. This insurance only covers personal belongings. Your landlord pays to fix damage to the structure of the home.
Homeowners and renters insurance policies usually include liability coverage. This coverage helps protect you against lawsuits if someone gets injured on your property. It can also cover you outside the home in some situations. For example, you might be covered if a member of your household accidentally hurts a person or causes property damage somewhere other than your home. Check your policy to see if liability coverage is included.
Does Property Insurance Cover Disaster-Related Damage?
Homeowners and renters insurance plans usually pay for damage caused by wind, snow, ice, extreme cold, fire, hail, lightning, volcanoes, and explosions. What the insurance actually covers for each of these events may vary. For example, removing trees that are struck by lightning might not be covered.
Damage caused by floodwaters is not covered. Home insurance typically doesn’t cover damage from floods, tsunamis, or earthquakes.
Flood insurance is a type of property insurance you usually buy separately. It protects you from the cost of damage caused by water-related disasters. This includes floods, tsunamis, drain and sewer backups, water main breaks, and more. Learn more about flood insurance.
Earthquake insurance also is a type of property insurance you usually buy separately. You might be able to add it to your homeowners or renters insurance policy for an extra cost. Learn more about earthquake insurance.
Get flood or earthquake insurance if you live in a place where these disasters are common. Flooding is a risk everywhere, though. According to the Federal Emergency Management Agency (FEMA), 98% of counties in the U.S. have experienced a flooding event. FEMA also reports that more than 20% of flood insurance claims in the U.S. are filed outside of high-risk flood zones.
Sometimes you’re required to buy flood insurance. These situations include:
You buy a home in a high-risk flood area. You have to buy flood insurance if you use a government-backed mortgage to buy a home in these areas.
You live in a high-risk flood area and apply for FEMA aid. Under FEMA rules, you must purchase flood insurance with coverage that at least equals the amount of aid you receive from FEMA. If you don’t, FEMA can’t give you certain types of aid. FEMA might pay for the first three years of your insurance.
You live in a high-risk flood area and receive federal disaster aid. In this situation, you must buy and keep flood insurance for your home. It’s required if you want the option to receive federal disaster aid in the future. This requirement applies whether you’re a homeowner or a renter. It applies for as long as you live at the property. The requirement also applies to any future homeowners. You’re required to inform them when you sell your home.
Steps To Take Before a Disaster
The most important step is to buy insurance that covers damage caused by disasters. If you wait until the last minute to do this, it might not help you. For example, most people purchase flood insurance through the National Flood Insurance Program. Under the program’s rules, you usually have to wait 30 days for coverage to start. Any damage that happens before then isn’t covered.
When shopping for insurance plans, you can:
Shop on your own. Call insurance companies or go to their websites. Most let you request price quotes online. You fill out forms to tell the company what you want in your plan. It’s a good idea to get quotes from a few companies. There can be big price differences for certain types of insurance.
Use an insurance broker. An insurance broker is someone you hire to shop for insurance plans for you. Many brokers also help you file claims with the insurance company. They support your efforts to get full payment. Know how to pick a good broker.
Become a more educated buyer. Check out insurance buying tips for homeowners and renters from United Policyholders. It’s a nonprofit organization that advocates for and educates people on insurance issues.
Once you have insurance, the next step is to get ready in case a disaster happens. Make sure you’re prepared to file insurance claims when a disaster strikes. Here are some things you should do:
Create a home inventory. Learn what information to include in an inventory. An inventory is a list of your belongings that includes evidence of their value. Your list should also include copies of important documents. These include insurance policies, birth and death certificates, wills, and prescriptions. Keep your insurance agent’s contact details with your policy and inventory.
Store your inventory and documents in a safe location. For example, you can store digital document copies online using a cloud service. This allows you to access your documents from anywhere with a strong password. Other storage options include an email account, a waterproof and fireproof safe on your property, or a safe deposit box at the bank.
Review your inventory each year. Add newly purchased property. Remove items you’ve gotten rid of.
Review your insurance policy each year. You might need to change your policy when your inventory changes. If you have an insurance broker, they can review this with you. Brokers also can shop around. Insurance offers can change from year to year, so a better deal might be available.
Steps To Take After a Disaster
You need to submit requests (called “claims”) to the insurance company. A claim asks the company to help you pay to repair damage or replace damaged items. You can take steps to make sure you get the amount of money you deserve. To make the process easier, you should:
Document the damage. Write a list of everything that was damaged. Describe the damage. Take photos and videos. Collect any receipts that show what you paid for items that were damaged. Get estimates for the cost of repairs as soon as you can.
Safely store your damaged property. Don’t throw it away. Your insurance company may need to look at it. They will decide how much it costs to fix — or if it needs to be replaced.
Prevent further damage. Make temporary repairs if you need to. Keep all your receipts for this work so you have a record for the insurance company of what you’ve spent.
File your insurance claims as soon as possible. Delays in filing could cause the insurance company to deny your claim. Delays also might affect whether you can get other forms of assistance, such as FEMA aid. For some types of aid, FEMA requires you to file a claim first with your insurance company.
Follow the steps explained in your insurance policy. Also keep copies of all the information you submit. This will help you if you want to dispute the amount of money the insurance company gives you. If you have an insurance broker, include your broker on any communications.
Prepare for the insurance adjuster. An insurance adjuster is an expert the insurance company sends to your home to look at what has been damaged and how bad the damage is. Be ready with your list of damaged items, purchase dates, receipts, and cost estimates for repair or replacement. Take notes on what the adjuster does and doesn’t look at when in your home.
Keep good records. Maintain records of all your communications with the insurance company. Include the date, time, who you talked to, and what you discussed.
Be willing to challenge an insurance company’s decision. You don’t have to accept the insurance company’s decision. The company might decide not to pay for certain repairs. They might decide to give you an amount of money that doesn’t cover your costs. Read more about insurance claims and disputes.
If the insurance company doesn’t give you enough money to cover all the costs, you may be eligible for federal aid. This aid is only available if the president declares a major disaster for your community. Learn more about the type of assistance you could get from FEMA or SBA.
Be aware of home repair contractor scams after a disaster. For example, a contractor might have you pay in advance and then never complete the work. They might do the work poorly so it costs them less. Learn more about how to protect yourself from these rip-offs.