How Are Natural Disasters Impacting Property Damage?

• Published Oct 12, 2023 • Reviewed and Fact Checked Our content is reviewed and fact-checked by unbiased insurance professionals to ensure the accuracy, quality and reliability of the information we provide. by Stephanie A. Makowski • 24 cited sources

Natural disasters are a major source of property damage. They cause billions of dollars in damage each year and can financially ruin a property owner who isn’t insured against the damage they do.

The natural disasters that most often cause significant damage to property include floods, earthquakes, hurricanes, droughts and associated wildfires, tornadoes, and storms.

Property Damage & Natural Disasters in the 21st Century

Key Facts

  • In 2021, natural disasters caused an estimated $56.9 billion in property damages.[1]
  • Of all types of natural disasters, tropical cyclones tend to be the most costly within the United States, averaging $22.8 billion per event.[2]
  • Behind tropical cyclones, drought ($11.2 billion per event), wildfires ($6.5 billion per event), and flooding ($4.6 billion per event) rank as the most costly natural disasters.
  • California, Texas, and Oklahoma experience the most federally declared natural disasters in the United States.[3]

How Are Natural Disasters Impacting Property Damage?

Summary

One study found nearly 60% of buildings in the U.S. are vulnerable to damage from natural disasters.[4]

Natural disasters have a major impact on property damage numbers. While individual, isolated events may cause significant damage to a given property (such as a home catching fire), natural disasters can strike very large areas with immense force. 

These disasters can also be difficult to predict and prepare for. Even a home designed to resist earthquakes or flooding can still be damaged by such events if they’re severe enough. Moreover, many properties in a disaster zone won’t be designed to significantly withstand the force of the disaster.

Read our Studies:

Summary

Natural disasters caused $56.9 billion in property damage in 2021. Property damage from hurricanes along the Gulf Coast and in the Northeast represented nearly half of that damage.

The Cost of Natural Disasters to Property Damage

Natural disasters deal billions in dollars of property damage worldwide each year, and the rate of disasters appears to be increasing. Over the past five years, the United States had 18 billion-dollar climate disasters per year on average compared to 6.7 billion-dollar disasters annually in the 2000s.[5] 

On an individual scale, natural disasters have the potential to literally level homes. Even less severe disasters can cause thousands of dollars in damage to a person’s property.

Top Natural Disasters That Impact Property Damage

Some of the natural disasters that cause the most property damage include the following:

Hurricanes

Hurricanes are powerful, highly destructive storms that can hit properties with intense wind, heavy rain, rising water levels, and even cause tornadoes. In 2021, it was found hurricanes caused about $8.59 billion in property damage and another $2 million in crop damage.

Buildings can be torn apart by hurricane-force winds, and the flooding from hurricanes can be intense. Hurricanes cause immense damage from storm surges, high winds, rip currents, flooding, and heavy rainfall. Common damage to homes include roof damage, interior flooding, and equipment damage, such as damage to air-conditioning units, hot-water heaters, transformers, and electrical equipment.

Florida is the state most often hit by hurricanes. Out of 467 hurricanes that have affected the U.S., 120 of them have hit Florida.[11] About 20% of hurricanes that make landfall in Florida are Category 3 storms, which are severe.

After Florida, Texas, Louisiana, North Carolina, South Carolina, and Alabama are hit by the most hurricanes, respectively.

Some insurance companies are pulling out of states that are greatly affected by natural disasters. For example, some insurance carriers in Florida and Louisiana are canceling policies or not issuing new ones there due to the high risk of hurricanes and other weather-related disasters.[9]

Tornadoes

Tornadoes are powerful columns of rapidly rotating air, hitting areas in their path with immense wind force. While still dangerous, tornadoes tend to cause less damage than many of the other types of disasters on this list. Tornadoes caused an estimated $226.56 million in property damage in 2021 and another $2.24 million in crop damage.

In the U.S., 31% of all tornadoes occur in Alabama, Mississippi, and Texas.[13] This area is often referred to as Dixie Alley.

The most severe tornadoes can take cars into the air, rip homes apart, and project debris violently into the air. This can cause both physical harm and property damage.

Drought & Wildfires

Droughts are periods of time where conditions are especially dry, which can kill crops, change the properties of soil, and make fires much more likely. Wildfires, uncontrolled fires that can burn for days in wildland vegetation, can be extremely difficult to combat. 

Wildfires cause an average of $6.5 billion in damage per event, with droughts estimated to cost as much as $11.2 billion in damage per event.

In addition to damage from flames, burning down homes and other structures, smoke from wildfires cause severe damage. Homes in burn areas are often seriously damaged from ash and smoke even if flames never touch the structure.

California is by far the state most affected by wildfires due to its frequent drought conditions.[12] Texas and North Carolina are ranked second and third for wildfires, respectively.

Similar to how insurance companies are pulling out of Florida due to the high number of claims from hurricanes and flooding, some companies are opting out of providing coverage in California due to wildfires. State Farm and Allstate announced they would no longer be accepting applications in California due to the high-risk conditions in the state.[22] 

Flooding

Flooding is one of the most common types of natural disaster, occurring when water levels rise (often due to heavy rain) beyond their normal levels. This can cause water to sweep over areas that are not designed to handle water, often dealing heavy damage to affected properties. 

Flooding can occur due to storm surges, flash flooding, dam breaks, debris flows, hurricanes, tropical cyclones, and other severe storms. 

Every state in the U.S. is affected by flooding, and the risk is present year-round.[23] Louisiana is at the most risk of flooding, followed by Florida and Texas.[17]

The structure of homes as well as all interior contents, including equipment like water heaters and electrical systems, can be damaged due to floods. Major floods cause an average of $4.6 billion in damage per event. 

Earthquakes

An earthquake is the shaking of the ground over a large area. Often, this shaking isn’t even detectable, but it is sometimes severe enough to cause substantial damage to buildings and other structures in an affected area. 

The estimated damage earthquakes deal each year was recently recalculated.[18] It is now believed to be as high as $14.7 billion annually, compared to the previous estimate of $6.1 billion.

The states most affected by earthquakes are California, Alaska, and Hawaii.[19]

Winter Storms

Winter storms occur in cold weather, where an affected area might be buffeted by both intense wind and various types of precipitation. Snow, a mix of snow and rain, and freezing rain are all potential threats in a winter storm. 

Winter storms cause an average of $4.4 billion in damage per event.

Minnesota, North Dakota, and South Dakota make up “blizzard alley,” so they are known for their severe winter storms.[20] Texas as well as East Coast states have also experienced strong winter storms in recent years.

How Are Natural Disasters Impacting Insurance Coverage?

Natural disasters make insurance more expensive. An area vulnerable to natural disasters is a riskier area to insure. 

Many homeowners insurance policies simply don’t cover certain kinds of disasters, like floods and earthquakes, meaning a homeowner needs to pay extra to get proper coverage if they live in an area at risk.

Insurance experts deem that about a quarter of U.S. homeowners may be underinsured when accounting for the additional risk posed by climate change and increased natural disasters.[24] 

Some companies outright drop policyholders they deem due too risky.[10] In some cases, people living in areas considered especially vulnerable to disasters such as wildfires have lost their insurance policies because insurers felt they couldn’t justify the risk of insuring their properties.

Looking Ahead: What Can We Expect?

According to the U.S. Geological Survey, climate change is expected to make droughts and intense storms increasingly more likely.[7] Additionally, rising sea levels mean locations that were once safe from the sea will now be vulnerable. 

The unfortunate reality is that the frequency and severity of natural disasters is likely going to be increasing in the coming years. Likewise, these disasters are going to be doing increasing amounts of damage. In response, it’s likely that homeowners insurance will become more expensive to compensate. 

This leaves homeowners in a tough position, with either a lack of coverage, unreliable coverage, or very expensive coverage. 

Frequently Asked Questions About Natural Disasters & Homeowners Insurance

The following are some of the most common questions about natural disasters and property damage:

What natural disasters cause the most property damage?

Tropical cyclones cause the most property damage. Between their intense winds and flooding, they can damage homes in multiple different ways that can be difficult to prepare for and design around.

What is the most common cause of property damage?

The most common cause of property damage is wind.[8] Wind can uproot trees, throw branches and outside furniture, and tear up roofs. It can also test the strength of buildings, potentially even causing them to collapse.

Does property insurance cover natural disasters?

A typical homeowners insurance policy will cover damage caused by some natural disasters but not all. Getting covered for floods and earthquakes, for example, typically requires purchasing additional coverage. 

Research whether you’re covered for the types of disasters that are more likely to occur in your area. If you aren’t covered through your standard policy, consider a rider or endorsement to extend that coverage.

How much property damage do natural disasters cause?

In 2021, natural disasters were estimated to cause about $57 billion in damages. This number is expected to rise, as certain types of disaster become more common as the climate changes.

What disasters are not covered by homeowners insurance?

Generally, most standard homeowners insurance policies do not cover damage from floods, earthquakes, tsunamis, and nuclear events.

Related Pages

Reviewed by Stephanie A. Makowski

Stephanie A. Makowski has over 20 years of experience in the insurance industry. She began her insurance career working for a large independent retail agency within their personal lines department. She then crossed over to the commercial lines department working with the construction and agriculture sectors. 

Sources

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  2. Billion-Dollar Disasters: Calculating the Costs. (August 2023). National Centers for Environmental Information.

  3. Natural Disasters by State [Updated May 2023]. (May 2023). World Population Review.

  4. Nearly 60% of Buildings in the U.S. Are Vulnerable to Natural Disasters, Study Finds. (June 2021). Consumer Affairs.

  5. Natural Disaster Facts And Statistics 2023. (June 2023). Forbes.

  6. Earthquake Damages Likely to Cost U.S. Billions More per Year Than Expected. (June 2023). Temblor.

  7. How Can Climate Change Affect Natural Disasters? U.S. Geological Survey.

  8. Here Are the Top 5 Causes of Property Damage — and How to Protect Your Home. (July 2018). NBC UNIVERSAL.

  9. Some Insurance Companies Pull Out of La., Fla. in Hurricane Season. (July 2022). The Washington Post.

  10. How Climate Change Could Cause a Home Insurance Meltdown. (July 2023). NPR.

  11. Hurricanes by State. World Population Review.

  12. Wildfires by States. World Population Review.

  13. Beyond Tornado Alley: Which States Have the Most Tornadoes? (April 2023). USA Facts.

  14. Cool Earthquake Facts. U.S. Geological Survey, U.S. Department of the Interior.

  15. Hurricane Preparedness – Hazards. National Hurricane Center and Central Pacific Hurricane Center.

  16. Here Are the Most and Least Disaster-Prone States. (March 2023). The Hill.

  17. States That See the Most Flooding Damage. (October 2022). U.S. News & World Report.

  18. New USGA-FEMA Study Highlights Economic Earthquake Risk in the United States. (April 2023). U.S. Geological Survey, U.S. Department of the Interior.

  19. Where Do Most Earthquakes Occur in the US? World Atlas. 

  20. Where Is Blizzard Alley? (December 2022). AccuWeather.

  21. Climate Change Is Hitting the Planet Faster Than Scientists Originally Thought. (February 2022). Nature.

  22. California insurance market response to wildfires. AP News.

  23. 10 States most at risk for flooding. National Flood Services.

  24. Map – Climate Housing Bubble. NBC News.