Home insurance and disaster preparedness

Any insurance professional will tell you that having insurance does not reduce the chance of things going wrong. And when something inevitably does go wrong, a person’s disaster preparedness usually affects the outcomes they face at least as much as their insurance policies do.

Another important truth? While having insurance can't prevent a disaster or mitigate any actual damage caused by one, homeowners insurance is the one thing standing between you and financial devastation should the worst happen. 

Natural disasters cost homeowners billions of dollars a year

Natural disasters and catastrophes are rare, but experts believe their frequency and severity are increasing. Whether it's wildfires, tornados, severe thunderstorms, or hurricanes, natural disasters cost homeowners billions of dollars every year – that's right, billions.

Consider these stats from the Insurance Information Institute:

• In 2023, natural catastrophe losses in the United States were $79.6 billion.

• Natural catastrophe losses in the United States rose to a historic high of $133 billion in 2017. That year produced Hurricanes Harvey, Maria, and Irma along with costly California wildfires. 

• The 2022 Atlantic Hurricane season produced 9 hurricanes, including Hurricane Ian which caused $54 billion in insured losses. 

• The Lahaina wildfire in Maui County, HI, made history as the worst natural disaster in Hawaii since it became a state. The fire burned down most of the town and caused $3.5 billion in insured losses.

• 2023 was the costliest year in US history for severe convective storms (SCS). SCS events contributed nearly $58 billion in total insured losses and $73 billion in total economic losses that year. 

For this data, catastrophe is defined as a natural event that causes one of more of the following:

• $25 million or more in insured property losses

• 10 deaths

• 50 injuries,

• 2,000 filed claims for homes and structures damaged.

Estimated Insured Property Losses Caused by Natural Disasters, 2014 – 2023 ($ billions)

^{Source: Insurance Information Institute: Spotlight On: Catastrophes – Insurance Issues, August 30, 2024}

How home insurance prepares you for disaster

Disaster preparedness helps you get through a catastrophic event as safely as possible, so you can and should read all of the tips and make all of the plans necessary for the types of disasters that could potentially affect your neighborhood. Doing so can even help you minimize some of the damage that may occur.

But all the planning in the world won't prevent a catastrophic event from happening. That's why you simply need to have homeowners insurance in addition to all of the recommended disaster preparation tactics. 

If you ever face a disastrous wildfire, hurricane, or tornado, home insurance helps you get back on your feet. It won't bring back treasured photos or family heirlooms, but coverage gives you the ability to rebuild your home and replace your possessions. Ultimately, having a homeowners policy helps make you whole again. 

Consider the repairs that you'd have to make to your home if strong winds damaged part of the roof. Now imagine if all or part of the roof was ripped off by a tornado. You'd have to repair the roof and any other structural damage. Moreover, you'd have to repair or replace any possessions that were damaged by wind or rain after the roof was gone. 

A home insurance policy provides dwelling coverage, which reimburses you for repairs to the structure of your home. It also provides protection against loss or damage to personal property after a natural disaster. This includes items like clothing, furniture, electronics, appliances, and much more. 

And where will you live when your roof is partially or completely missing or while it's being repaired? Most home insurance policies provide loss of use coverage that helps you pay for certain living expenses when they go above and beyond your normal costs, like hotels and meals while you temporarily relocate after a covered loss. 

How do insurance and disaster preparedness overlap? 

There are several ways in which home insurance and disaster preparedness go hand in hand. Perhaps the most important place where these two converge is that both encourage you to take steps to protect your home from damage. 

A good example of this is when insurance companies often offer discounts or better rates for hardening your home against wind damage with things like storm shutters and roof tie downs. Similarly, Ready.gov includes “make your home safer”  as one of its 12 ways to prepare.

Another example of insurance and disaster preparedness overlapping is that both emphasize making an inventory of your belongings.  This is so you can quantify to your insurance company what you've lost and get through the claims process faster and with less hassle. 

Government assistance is not enough

The Federal Emergency Management Agency (FEMA) and groups like the American Red Cross provide disaster assistance after a catastrophe, and some people assume that aid will be enough if they don’t have insurance. However, relying on government assistance or other aid to completely rebuild your home and your life is probably not a wise choice.

On the one hand, FEMA does help individuals and families who have lost their homes as a result of a presidentially declared disaster. However, you can only receive assistance for items not covered by insurance.  Federal law states that FEMA assistance cannot duplicate the assistance you receive from your insurance company. 

Examples of items that FEMA may provide assistance for include:

• Appliances. FEMA may help you repair or replace disaster-damaged hot water heaters and furnaces, but repairs to  items like dishwashers and home entertainment equipment aren’t reimbursed.

• Ceiling and roof damage. FEMA may help you repair disaster-caused leaks in a roof that damaged ceilings and electrical components like overhead lights. 

• Floors. FEMA may help you repair subfloors in occupied parts of the home that were damaged due to a disaster.

• Windows. FEMA may assist with broken windows but not blinds and drapes.

In addition, FEMA's Individuals and Households Program assistance may include:

• Funds for temporary housing while you are unable to live in your home, such as rental assistance or reimbursement for hotel costs.

• A temporary housing unit, if approved for the disaster, when you are not able to use rental assistance due to a lack of available housing resources

• Funds for hazard mitigation assistance to help eligible homeowners repair or rebuild stronger, more durable homes

• Funds for other uninsured or under-insured disaster-caused expenses and serious needs

You should also note that while some housing assistance funds (grants that don’t have to be paid back) are available, most disaster assistance from the federal government is in the form of low interest disaster loans administered by the Small Business Administration. 

Long story short? FEMA’s assistance is intended to meet basic needs following a presidentially declared disaster, and it is not sufficient to return you to your previous state. It’s not a substitute for insurance and cannot pay for all losses caused by a disaster. Rather, it can help you supplement your insurance coverage in certain areas in which you are uninsured or underinsured.