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Insuring your home against natural disasters

The recent spate of natural disasters in the U.S. is a reminder to homeowners that they need to protect their houses and possessions by buying homeowners - and perhaps - special disaster insurance.

But obtaining such policies in regions prone to natural disasters, and collecting on it should the need arise, can get complicated.

On "The Early Show on Saturday Morning," Regina Lewis, personal finance expert for AOL's DailyFinance.com, explained how to navigate the disaster insurance landscape, and looked at help you might get from FEMA or the Small Business Administration.

Homeowners insurance, Lewis explained, would cover tornadoes, because they cover "wind events." Things that aren't covered, she says, include earthquakes and flooding. "That is the biggie, the No. 1 thing that catches people," Lewis said of flooding. "

Also not covered by conventional homeowners insurance: landslides and natural fires (as opposed to ones started by people or mechanical flaws). For all of this you need disaster insurance, which is supplemental (you have to add it to your homeowners policy)."

Disaster insurance. Lewis pointed out, is "all done by a risk assessment, based on where you live. And you can be sure the insurance companies have run those numbers. But you've got to remember: These catastrophic events are just off the charts. They level your home. So take something like hurricane insurance: If the annual people is $1,074, let's say, over ten years, you're spending roughly $10,000 - FEMA will tell you six inches of water in your basement, that is 25 grand right off the top, and that's before you replace any of the contents. Needless to say, (disaster insurance in this instance) would pay for itself."

Flood insurance is only sold by the federal government, though - not by insurance companies.

Where you live determines how vulnerable you are to various types of natural disasters. "It's all about propensity," Lewis noted. "You can look online to see what your risk is. For instance, (in) "Tornado Alley," you'll see the high risk, the slight risk. That doesn't mean that tornadoes don't happen elsewhere. Hurricanes (happen in) different areas of the country, (and can of course be) very damaging. In fact, half of all catastrophes are related to hurricanes."

How should people approach buying disaster insurance?

"You really want to look for the word replace versus repair," Lewis stressed, "because, (in the case of natural disasters), those are not repair scenarios. Those are complete replace scenarios.

"Also, understand your deductible. Sometimes, it's not a hard-and-fast number like $300 or $500, which we're used to with automobiles. It's a percentage, like 10 percent. If you have $300,000 worth of earthquake damage on the foundation of your home, ten percent of that is 30 grand up front, so you'd need to understand that number, especially if you don't have access to cash."

FEMA usually gives people 60 days to file claims after a natural disaster hits, Lewis says, "and they're very careful about giving you lots of different options. You can call, you can go to some of their centers. You can apply online.

"If you've got a claim that's less than $1,000, the general rule of thumb is take care of that yourself. Because, of course, they do keep track of the amount of claims that you make," because your premium could go up after that.

Be sure to "look at the (coverage) caps" in homeowners and disaster insurance, Lewis says. "A lot of these, even the disaster insurance, do have caps. They'll say things like, 'We'll give you $5,000 to replace the contents of your home.' If you lived in a home for 30 years, odds are you have more than $5,000 worth of stuff there. It might not even be worth it."