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What Type of Insurance Covers Natural Disaster in Michigan

The Michigan Department of Insurance and Financial Services (DFIS) regulates the different types of disaster insurance policies. Wildfires, floods, tornadoes, severe storms, tropical cyclones, hail storms, and earthquakes are natural disasters that may occur in Michigan. Although Michigan is considered to be in the region that experiences the least natural disasters in the United States, recent research has shown that more natural disasters are likely to occur more frequently in Michigan. In the near future, more flooding-related disasters would occur in Michigan due to high precipitation, snowmelt, rising sea levels, and heavy rains. The DFIS also provides education and natural disaster awareness through the “Michigan Prepares” initiative of the state government on how residents can safeguard their properties ahead of a natural disaster.

In Michigan, most disaster/catastrophe insurance policies are purchased separately as individual insurance policies. These policies only cover the damages resulting directly from the particular natural disaster described in the policy contract. Therefore, it is important for residents to purchase disaster insurance policies for disasters peculiar to Michigan. It is impossible to claim coverage for damage caused by a different natural disaster. For example, earthquake insurance can not be used to claim damages caused by a windstorm.

Michigan residents are susceptible to flooding and can ascertain the minimum floodplain standards and the flood risk of their neighborhood by looking up their addresses on the FEMA Flood Map Service Center. Residents can also check the website of the National Weather Service for active tropical cyclones in their communities. It is important to note that whether residents are in a high-risk flood zone or not, flood insurance remains a necessity, especially during flood seasons. This is because most homeowner insurance policies don't cover damages resulting from floods. A Michigan-licensed P&C insurance agent can advise you on the best disaster insurance policy that would serve your needs in the event of a disaster. Michigan residents can search and verify their prospective insurance agent’s license number on the DFIS website or by calling the department on (877) 999-6442.

What is Disaster Insurance?

Disaster insurance is an insurance policy that protects individuals from financial losses caused by specific natural disasters. These disasters include but are not limited to floods, earthquakes, tornadoes, sinkholes, tsunamis, windstorms, thunderstorms and lightning, winter storms, etc. Natural disasters are typically not predictable, although certain technologies exist that can predict the speed, size, and magnitude of natural disasters. For example, the National Weather Service can detect hail using radars. Seismographs detect earthquakes, while doppler radars are used to detect the rotation of storm clouds, wind direction, wind strength, and precipitation and also measure hail size. The National Hurricane Center (NHC) predicts some natural disasters like tropical cyclones, hurricanes, thunderstorms, etc.

Do Disasters Need Insurance Coverage?

Yes, disasters need insurance coverage to protect against the debilitating damage caused by these natural disasters. Natural disasters are unpredictable and can happen suddenly, leaving no room for property owners to prepare for them. Fixing the damage caused by natural disasters is also very expensive for residents and business owners to bear. For example, one inch of floodwater in Michigan costs a home or business owner at least $10,000 in damage repair costs, while the annual loss estimate for flood-related damage in Michigan is $100 million. An estimate of 10,000 Michigan residents were forced to evacuate from their homes and businesses due to a flood in May 2020. Michigan lost a total of 9,289 acres to wildfires in 2021. Natural Disasters also need insurance coverage because standard residential and business property insurance policies do not cover certain types of disasters like floods and earthquakes.

It is therefore important that property owners in Michigan, especially those who live in Muskegon, Pere Marquette, Chippewa, Cass, and Tittabawassee river basins purchase disaster insurance policies. They should also consult state-licensed P&C insurance agents to help them choose the disaster insurance policy that fits their needs.

What Types of Natural Disasters Are Common in Michigan?

Common natural disasters in Michigan include the following:

  • Floods: Flooding is the most common and most expensive natural disaster. This is because Michigan is home to 11,000 inland lakes flowing through its territorial borders. Flooding is caused by heavy rainfall, spanning several days on end. In 2020, Michigan had 20,500 flood insurance policies amounting to over $4 billion in coverage. A storm surge is also another cause of flooding. It is the unusual rise of water generated by a storm's winds. According to the National Hurricane Center, a storm surge is caused by an increase in the water level generated during a storm. The water level is then pushed towards the shoreline away from the coast by the force of the wind. The effect of this increased water level is flash floods and flooding that destroys properties and displaces people in its path. In 2013, 16 counties in Michigan were given a federal disaster designation as a result of excessive flooding caused by extreme storms and storm surges.

  • Tornadoes and Tropical Cyclones: Michigan had 17 tornado disasters out of 1,376 that occurred in the United States in 2021 and incurred losses of 17 billion dollars. Tornadoes are not very common in Michigan, but the effect remains devastating. Tropical cyclones originate from the Atlantic basin, including the Caribbean Sea, the Gulf of Mexico, and the Atlantic Ocean, and occur in Michigan on average once every five years. It is responsible for storm surges, extreme winds, and windstorms. According to the National Oceanic and Atmospheric Administration (NOAA), the tropical cyclone season in Michigan begins in June and runs till November.

  • Thunderstorms and Lightning: A single lightning strike can cause the atmosphere's temperature to reach 54,000 degrees Fahrenheit. In 2021, Michigan had 1,887 claims resulting from lightning-related damage. These claims amounted to $26.9 million, thereby ranking Michigan 10th highest in lightning-related insurance claims in the United States.

  • Hailstorms: Hail is also a feature of thunderstorms. Hailstorms happen when raindrops freeze due to updrafts lifting rain above the freezing temperature in the atmosphere. These produce copious amounts of hail. Hailstones fall to the earth when the frozen precipitation or raindrops become too heavy for the updraft to hold it up in the atmosphere. Hailstones appear as ice in patterns called hail swaths, which differ in size as the storm moves. Hail-related damage claims paid out in 2020 amounted to $3.1billion. Michigan had a total of 51 hail incidents in 2021

  • Wildfires: In 2021, Michigan experienced 435 wildfires, which destroyed 9,289 acres. More than four million homes in the United States are at risk of wildfire destruction.

  • Sinkholes: Sinkholes have very damaging effects on businesses and property owners in Michigan. Sinkholes occur due to chemical imbalances that cause the soil beneath the surface to dissolve into a pool of water. Over time, the soil surface weakens and gives way, leaving a big hole. Sinkholes quicken and worsen soil erosion, reducing the quality of underground water. It can weaken infrastructures such as houses, roads, bridges, and sewer systems and cause them to collapse.

What Types of Disasters Are Insurable in Michigan?

Disasters that are insurable in Michigan include the following:

  • Floods: Flood insurance covers the effects of flood damage. Flood disrupts activities and displaces residents and wildlife, contaminates water systems, thereby causing waterborne diseases and washing away crops, which causes loss of income to farmers and food shortage for residents.
  • Storms: While standard homeowner insurance policies provide windstorm coverage, the coverage is sometimes not enough to cover incurred damage costs. Storm damage includes damage from hail, wind, rain, and snow; these are covered by homeowners insurance.
  • Tornadoes and Tropical cyclones: Violent and aggressive winds destroy livelihoods and property and make life uncomfortable for residents. Tornadoes and tropical cyclones pull down power and telecommunication lines, leading to power and communication outages for days. They can also blow off roofs, windows, doors, and lawn fences and pull down houses, displacing residents from their homes and business premises.
  • Sinkholes: Sinkholes destroy public and private properties and also contaminate household water systems with dirt, debris, and sewage. Sinkhole insurance is purchased as a separate policy because standard residential and business property insurance does not cover sinkhole disasters.
  • Winter storms: Winter storms are accompanied by icy temperatures that can cause power outages and make the winter unbearable for residents. It also hinders mobility by blocking roads with snow, thereby keeping residents stranded and immobile. Winter storms also affect plumbing systems and cause frozen and burst pipes in some cases, leading to infrastructure and property damage in the long run. Standard residential and business property insurance policies cover most damages from winter storms.

What Type of Disasters Are Not Insurable in Michigan?

All natural disasters, including floods, earthquakes, wildfires, tropical cyclones, winter storms, thunderstorms, hailstorms, sinkholes, are insurable in Michigan. Some of these disasters are not covered under some existing residential, and business property insurance policies and have to be purchased as stand-alone policies. The Broad (HO-2) homeowners insurance policy, also known as the named peril policy covers damage from perils such as lightning, windstorms, and hailstorms.

What Are the Types of Disaster Insurance in Michigan?

Disaster insurance policies available in Michigan include the following:

Earthquake Insurance

Earthquake insurance covers damages on residential and commercial properties in Michigan. Although earthquakes are not very common in Michigan, you should consider getting earthquake insurance, especially if your business or residential property is in an earthquake-prone area. You should talk to a Michigan-licensed P&C insurance agent to weigh your options and get more information about earthquake insurance coverage and other natural disasters. Earthquake insurance can be purchased as a separate policy or as an endorsement to an existing residential or business property insurance policy. Typically, it covers the cost of:

  • Repairs to the building and the ground underneath
  • Clearing up post-earthquake debris
  • Stabilizing the soil under the building
  • Living expenses while the damaged property is being restored
  • Mudflow, landslides, and other minor disasters resulting directly from the effects of the earthquake

Earthquake insurance does not cover damage to the following:

  • Landscaping, fountains, sculpture, pool, car damage, property fence, etc.
  • Flood or fire damage as a result of the earthquake
  • Sinkholes, erosions, and other hidden openings under the property that are not caused by a earthquake

Flood Insurance

The National Flood Insurance Program (NFIP) provides flood insurance to Michigan residents who have suffered flood-related damage to mitigate the devastating effects of flood damage. Flood hazard is not included in Michigan's standard residential and business property insurance policies. With the current rise in climate change, increase in heavy rains, and water levels of rivers, lakes, and other water bodies, flood insurance has become necessary for residents and business owners in Michigan. Residents of Michigan can buy flood insurance through:

  • Write Your Own (WYO) insurance program
  • State licensed insurance agents
  • Admitted surplus line carriers
  • National Flood Insurance Policy (NFIP)

Michigan residents who reside in any of the participating Michigan NFIP communities can purchase flood insurance from the NFIP. Flood insurance covers claims on damages to the insured property resulting directly from a flood. This includes damage to:

  • Essential systems such as furnaces, heat, ventilation and air conditioning systems, solar energy equipment, plumbing, and electrical systems
  • Home appliances such as dishwashers, dryers, washing machines, refrigerators, and freezers
  • Carpets and window treatments and trimmings, permanently installed cabinets, shelves, and bookcases
  • Foundation walls, basements, staircases, and anchorage systems
  • A garage or a detached space for storage or parking
  • Personal property and valuables

Flood insurance also covers certain damages that are not strictly floods but occur as a direct consequence of flooding; examples of such damages are mudslides, underground water seepage, swimming pool collapse, and sewer blockage.

Flood insurance in Michigan does not cover:

  • Damage by any other natural disaster, even if it results in flooding
  • Damage to cars and other means of transportation
  • Damage by mold or mildew that is not directly from the flood and could have been prevented by the property owner or occupant
  • Additional living expenses or loss of income as a result of ongoing repairs of the insured buildings and loss of access or use of the buildings.

Windstorm Insurance

Windstorm insurance policies in Michigan provide protection to residential and business properties from the effects of damage from horizontal winds and wind storms. This coverage includes damage to parts of the buildings such as the roof, walls, windows, and personal belongings. Other windstorm-related claims include:

  • Damage to property, blown down fences, fallen trees, and tree branches, either destroying your home or parts of it.
  • Cost of removing debris as a result of the windstorm

Windstorm insurance also provides additional living expenses if the windstorm makes the insured building become temporarily uninhabitable due to the storm damage. In Michigan, standard homeowners and commercial property insurance policies cover damages from windstorms.

Sinkhole Insurance

Sinkhole insurance covers the repairs to residential and business properties resulting from sinkholes. Sinkholes occur due to some chemical imbalance that causes the rock beneath the soil surface to dissolve when rain or snow falls and dissolves through the soil. Over time, the amount of moisture or water in the soil causes these rocks, usually made of limestone, holding the soil together to dissolve over time, leaving a gaping hole behind. These gaping holes pull down buildings, bridges, and other public infrastructure and can be very expensive to repair.

In the United States, sinkholes cause an average of $300 million in damages annually. Sinkhole insurance is not included in homeowner or business insurance policies because of the magnitude of damage it incurs and how expensive it is to repair. Michigan residents with properties and businesses in sinkhole-prone areas should speak to licensed P&C insurance agents for more information concerning getting sinkhole insurance.

Do You Need Disaster Insurance in Michigan?

The Great Lakes in Michigan collectively contain 20% of the world's freshwater sources, making Michigan susceptible to flooding. Global warming, melting ice caps and rising sea levels increase the flooding risk. In 2021, 9,000 acres of land were burned due to wildfires in Michigan. Lightning hazard insurance claims in Michigan amounted to $26.9 million in 2021.

  • Flood: This is the most common natural disaster in Michigan. It is prevalent in all cities and counties in Michigan because of the abundance of water bodies within the territorial borders of Michigan, the high precipitation levels, and rainfall spanning over several days. The two major flood events which occurred in Michigan in 2013 and 2014 due to several days of rain caused combined damage of $3.1 billion. Flood insurance is a necessity in Michigan because of the devastating effects on the lives and livelihoods, which can result in damages that strain the resources of flood victims.
  • Tornado: Tornadoes are not common in Michigan, but the state experiences around 16 tornadoes annually. Michigan residents living and operating businesses in Coldwater, Hillsdale, Gladwin, Hale, Oscoda, Harrisville, Lansing, Flint, and Grand Rapids need disaster insurance coverage for tornadoes. This is to protect against the loss of shelter, livelihoods, and income, especially that a tornado brings.
  • Sinkholes: Sinkholes are not common in every part of Michigan. However, they are predominant in the Alpena and Presque Isle Counties. Sinkholes manifest as gaping holes in the earth and can cause severe injury, displacement, and death.
  • Lightning: Michigan had 1,887 lightning loss claims, amounting to $26.9 million, making it the 10th highest number of lightning claims in the United States. Michigan residents need lightning insurance to protect themselves from the devastating effects of lightning, which often manifests as a fire disaster.

You should consult a Michigan-licensed P&C insurance agent to discover the common natural disasters in the area you are looking to buy or rent your property and the most suitable option to protect you.

In Michigan, you need disaster insurance if:

  • You are a property or business owner in Michigan
  • Your property or business is located in an area within the state that is prone to certain types of disasters like tornadoes, hurricanes, and sinkholes
  • You want to rent or buy an apartment in Michigan

What Should I Do After A Natural Disaster in Michigan?

The aftermath of a natural disaster can be a very distressing experience. However, you must be careful to avoid making mistakes that would mar your insurance claims. If you are a victim of a natural disaster, you should consider taking the following steps:

  • Keep a record of your property's damage by taking pictures, making videos, and keeping notes of the damages. Itemize properties and personal items destroyed or lost due to the disaster. The invoices of these damaged items should also be kept to support your insurance claim.
  • Do not discard any items or valuables destroyed by the disaster before evaluation and inspection by your insurer.
  • Contact your insurer to inform them of the incident and also file your claim. Your insurance company can be reached on the toll-free number on their website. Your insurer will send an adjuster to inspect and evaluate the extent of damage to your home or business.
  • Make temporary repairs on your residential or business property affected by the disaster to prevent further damage. Your disaster insurance may not cover further damage to your property. Ensure you keep records of the temporary repairs so you can claim the amount from your insurer.
  • Inquire about additional living expenses coverage or business interruption coverage to help mitigate the loss of your income during the repairs of your home or business premises.
  • Ensure you are present when contractors are inspecting your property to avoid inflation in the cost of repairs. Insurers and insurance companies will not cover the cost of inflated repair costs because they have their own private contractors who would give them the actual market price for these repairs.
  • Report all flooding incidents and flood-related damage to the Federal Emergency Management Agency (FEMA). FEMA assists victims of floods with housing assistance, disaster grants, and low-interest loans to mitigate the effects of these disasters.
  • Avoid adjusters who ask you to pay for their services.

Victims of price gouging by unscrupulous contractors can file complaints with the Michigan Attorney General’s Office online or call the office at (877) 765-8388.