Know what your homeowners' policy covers Jill On Money: Fire, flood, fail – Review your homeowners' policy now

JILL ON MONEY

Wildfires, hurricanes, flash floods - if the past few years has taught us anything, it's that "once-in-a-generation" events seem to be occurring a lot more frequently. That puts the onus on you to focus on a sleepy corner of your financial life that's supposed to protect against these risks: your homeowners' insurance policy.

There are three big exceptions to standard policies: flooding (more on this later), earthquakes, and general wear and tear of the dwelling. That said, most homeowner's policies contain four pillars:

Coverage for your home's structure if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in the policy. Coverage for personal belongings, though expensive items like jewelry, furs and silverware usually have specific dollar limits if they are stolen. Liability protection: Coverage against lawsuits for bodily injury or property damage that policyholders, family members, or pets cause to other people. Additional living expenses: Coverage for hotels, short term rentals, restaurant meals and other living expenses if a house is inhabitable due to damage from a fire, storm or other insured disaster.

Wildfires: Covered, with caveats

Most policies provide coverage against wildfire damage, including smoke damage and looting after an evacuation. They also cover additional living expenses if your home is temporarily unlivable. Damage to your car would be covered by the comprehensive portion of your auto policy.

Floods: Never covered

Too many people learn this lesson the painful way: floods are not covered, period. It doesn't matter if the water came from a hurricane, a burst dam, or a freak spring storm. To purchase flood protection, you need a separate policy, typically through the government's FEMA's National Flood Insurance Program (NFIP).

Before you try to outsmart the system, know that there is a 30-day waiting period before a new flood policy kicks in, so you can't buy it the week a storm is bearing down on you. NFIP coverage tops out at $250,000 for your home's structure and $100,000 for its contents; if you need more, ask about excess flood coverage from a private carrier.

Hurricanes: A potential double-whammy

Your homeowners policy covers wind damage - torn-off roofs, shattered windows, storm-driven debris - but it does not cover the flooding that often follows a storm. According to the Insurance Information Institute, nearly 90% of U.S. natural disasters involve flooding, and inland flooding from a weakening hurricane can be just as devastating as the storm surge itself. That means hurricane season prep really means a two-policy conversation: homeowners for wind, flood insurance for water.

What you should do right now

Grab your existing policy and review the declarations page. Understand the key elements, like your deductibles, your limits, and what disasters are named (and those that are excluded) in your policy. Your payout is only as good as your coverage limits, so this is worth an annual check-in, especially as rebuilding costs climb.

Next: Take photos or video of your home and belongings now, while the skies are clear, and store that inventory somewhere you can access it from anywhere. And if you're on the fence about flood coverage because you aren't in a "high-risk" zone, know that 20% of flood claims come from low- and moderate-risk areas. It's genuinely one of the more affordable insurance add-ons out there, especially compared to the cost of rebuilding a home from scratch.

Insurance isn't a fun thing to think about until you need it - and by then, it's too late to address the gaps. Don't fail this test - pull your policy, close the gaps, and get it done before the next disaster does it for you.

Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected]. Check her website at jillonmoney.com.