A home insurance policy is meant to provide protection in the event of damage or other unexpected expense, but many of them specifically exclude losses resulting from acts of nature including tornadoes and mudslides as well as man-made disasters such as large-scale warfare. Collectively, these are known as ?Act of God? provisions, a term insurers use to describe events that they see as beyond reasonable control.
Despite the reluctance of insurers to provide protection against the truly unpredictable, there may be some options for homeowners in areas at risk for natural disasters to obtain additional coverage. For example, a homeowner in a lowland area that frequently experiences flooding can apply for a flood rider to provide relief in case of water damage and individuals in areas prone to earthquakes may be able to apply for an insurance policy designed specifically for the elevated risk.
Of course, insuring against unforeseeable and highly destructive events represents a severe risk from the standpoint of the insurer. Natural disaster payouts are often extremely high, and so insurers will work to offset the risk in the investment by charging a heavy premium for disaster riders, especially where a specific Act of God is known to take place.
However, even with these additional riders, there are still some aspects of Act of God events that virtually no insurance policy will cover. For instance, if a major windstorm causes damage to a home specifically covered by a windstorm rider while also knocking out power in the area for an extended period, the insurance policy will cover the damages to the home but will not provide coverage for any perishables or other commodities lost as a result of the outage.
Another issue with disaster riders is in the event of a combination disaster such as a hurricane. For example, if the same windstorm brought with it heavy rain and did damage to the home in such a fashion that the roof was compromised and allowed the home to flood, the windstorm insurance rider would cover losses directly related to the wind but the homeowner would be left responsible for any water damage and other losses not directly caused by wind.
While homeowner?s insurance can be an extremely valuable resource in some situations, it is far from a perfect solution. The limitations of home insurance include the restricted options a policy sometimes provides in the wake of a devastating loss, making disaster riders essential to any homeowner at risk for losses stemming from a natural or manmade disaster. These policies can be prohibitive to maintain, but far less so than rebuilding from scratch.