You may think that once you buy homeowners insurance you are covered for every possible peril, from natural disasters to fire to lightning to theft. But a regular homeowners policy doesn't cover all types of damage and losses, which means you may need to consider additional coverage.
"It begins with understanding what a traditional standard homeowners policy covers," says Laura Adams, senior consumer analyst for insuranceQuotes, an insurance shopping portal.
The two major perils that aren't covered by a standard homeowners policy are earthquakes and floods, a fact that many homeowners discovered too late after Superstorm Sandy in 2012. If a storm tears off your roof and water pours in, that's usually covered by homeowners insurance. If water comes up from the ground, it isn't covered, unless you have flood insurance.
"That's something that a lot of people didn't think of," says Michael Thrasher, research analyst for ValuePenguin, which provides referrals to service providers. "There hadn't been a flood [in the New York and New Jersey area] in most people's lifetimes."
The Federal Emergency Management Agency publishes flood maps of the U.S., and it's worth checking with your insurance agent and your neighbors about your risk level. If your home falls in a flood zone and you have a mortgage, your lender will usually insist that you have flood coverage.
But flooding also occurs outside those zones, including inland areas, says Michael Barry, vice president of media relations for the Insurance Information Institute, an industry-funded consumer education organization. "Just because you're not in a FEMA-designated flood zone doesn't mean your property isn't subject to flooding," he says.
Most homeowners policies don't cover earthquakes, but you can buy a separate policy or an endorsement. While California is the state most known for earthquakes, only about 10 percent of homes there carry earthquake insurance, according to the Insurance Information Institute. "A lot of people are turned off by the very high deductibles," Barry says. Deductibles can range from 5 to 25 percent of the insured value, according to the California Earthquake Authority.
Hurricanes are covered by most homeowner policies, though in some hurricane-prone states there is a separate deductible, and in a few coastal areas windstorm policies are separate from homeowner policies.
Insurance is regulated by the states, and each policy is different, so a local agent is your best source of information on what coverage is needed where you live. "They understand what claims are filed in your area and what claims are common in your area," Thrasher says.
You may also need riders or endorsements, essentially extra coverage added to your policy, to cover valuable items with coverage limits, including jewelry, firearms, furs, art, sporting equipment or collectibles.
If you operate a business from your home, ask your agent if you need additional coverage. A standard homeowners policy may not cover business equipment or inventory, and it may not provide the level of liability coverage you need.
If you turn your home into a rental property, you may need a different kind of insurance. A landlord's policy, for example, does not cover the home's contents, which means your tenants will need their own renters insurance policies. Since some homeowners policies don't cover vacant homes, you would need to find a company or policy that does. For vacation homes, you might need to purchase one kind of policy if you're renting out the home or another type if you're leaving it vacant much of the time.
"Any time you don't live in the home … you either need a different type of insurance or you need to adjust the coverage you have," Adams says.
Here are six types of insurance or riders you may need beyond a basic homeowners policy:
Flood insurance. About 20 percent of flood claims come from areas designated low or moderate risk, according to the National Flood Insurance Program. High-risk areas have a 25 percent chance of flooding during a 30-year mortgage. You can check your home's risk at floodsmart.gov. You can buy a flood policy through your insurance agent to fill in the gaps in your homeowners policy. "It does not cover water damage that comes from the ground," Adams says. "People just assume if it's water, it's going to be covered … Way too late, they realize it's not covered."
Earthquake insurance. Standard homeowners policies don't cover earthquake damage, though most cover damage from fires caused by earthquakes. You can buy a separate earthquake policy or rider from your insurance agent.
Home business coverage. If you are running a small business out of your home, you may need special coverage for business inventory or liability. Exactly what coverage is the best fit will depend on the type of business and your homeowners policy.
Riders for valuable items. Your policy may limit coverage for jewelry, collectibles, firearms, furs, silverware, gold coins, art and other valuable items. "If you've got more than that, you probably need a rider," Adams says. "That's an area where a lot of people need more coverage."
Sewer backup and sump pump failure rider. Water damage from sewer backups is not covered by homeowners insurance or flood insurance. But you can buy a rider at a nominal cost to provide that coverage.
Umbrella liability policy. A homeowners policy usually limits your liability coverage to $100,000, though you can choose a higher amount. This covers you if someone is injured on your property or if you are sued. People with sizeable assets may want to consider an umbrella liability policy with an additional $1 million in coverage.