Cover major local risks

Last reviewed: October 2011

For all the hand-holding that insurance advertisements promise, standard homeowners policies still leave you hanging in some big ways. They don't cover damage from floods, earthquakes, sinkholes, and landslides. In some states, insurers have hiked deductibles for wind damage from hurricanes, tornadoes, or severe windstorms. To protect your home from those perils, you might need to buy separate coverage, which comes with more caveats. In some states, for example, insurance for specific events has a percentage deductible rather than a dollar amount. Florida requires that insurers offer a choice of hurricane deductibles: $500, or 2, 5, or 10 percent. The bigger the percentage deductible, the lower the premiums and the less coverage you'll have.

And the additional coverage can be expensive. For a single-family wood-frame house in Northridge, Calif., with a replacement value of $400,000, Travelers would charge $1,252 for a standard homeowners policy, according to the website for the California Department of Insurance. Adding earthquake coverage would cost $1,408. The deductible would be $1,000 for the standard coverage and a whopping $60,000 for the earthquake insurance.

Don't forget flood insurance. Even if you don't live near a river, lake, or other flood-prone body of water, your home could still be at risk from heavy rains, nearby construction, accumulated snow and ice that melt suddenly in a warm snap, and even the collapse of a levee or dam miles away.

Private insurers typically don't cover flooding at all, but you can buy federally sponsored protection from your agent through the National Flood Insurance Program. You should consider buying it even if you're in a low-risk area; premiums are commensurately low. Stay up-to-date on your risk by checking flood maps and weather patterns at FloodSmart.gov.

This article appeared in Consumer Reports Money Adviser.

Posted September 2011 — Consumer Reports Money Adviser issue: October 2011