Hawaii's Volcano Insurance: What's Covered?

In 2018, the Kīlauea volcano erupted for months, covering 13.7 square miles of land with lava, destroying 700 homes, and displacing over 2,000 people. This begs the question: do people in Hawaii have volcano insurance? The answer is not so straightforward. While there is no such thing as separate volcano insurance or lava flow insurance, damage from volcanic eruptions is sometimes included in homeowners insurance policies, commercial property insurance, and other business insurance policies. It is either part of the standard policy or an add-on for those in risk areas. However, it is important to note that policies may have specific exclusions, and coverage for damage caused by lava flow can be rare and expensive.

There is no volcano insurance or lava flow insurance in Hawaii

There is no such thing as volcano insurance or lava flow insurance in Hawaii. This is because it is a very specialist type of insurance and volcanic eruptions are infrequent. Jerry Bump, chief deputy insurance commissioner at the Hawaii Department of Commerce and Consumer Affairs, has stated that such insurance is simply not available.

However, some homeowner's insurance policies may cover damage caused by volcanic eruptions and lava flow. If a homeowner has purchased an 'all-risk' policy, then damage to their property may be covered. But these types of policies are rare, hard to find, and expensive. Most people have a general homeowner's policy, which may cover damage by lava-induced fires, but every carrier's policy is different and may have specific exclusions.

In the case of an eruption, the Hawaii Insurance Division advises residents to remove belongings from their homes and make plans for alternative accommodation. For those with homeowner's insurance, they recommend keeping the policy in a safe place, documenting belongings with pictures or videos, and removing as much from their homes as possible, as lava flow could cut off access.

There are other types of insurance that can cover specific damage caused by volcanic eruptions. Earthquake insurance usually exists as an endorsement on a homeowner's or commercial property insurance policy. Flood insurance is also available for those in risk areas, as water damage is often excluded from property policies. Commercial auto insurance can protect vehicles damaged by volcanic ash, and business interruption insurance can help cover payroll, lost profits, taxes, etc. while damaged property is being rebuilt.

Homeowner's insurance may cover damage caused by lava flow

While there is no such thing as volcano insurance or lava flow insurance, according to Jerry Bump, chief deputy insurance commissioner at the Hawaii Department of Commerce and Consumer Affairs, homeowners insurance may cover damage caused by lava flow. However, this depends on the specific policy and how the home was damaged.

Most homeowners insurance policies cover some damage related to volcanic eruptions, such as property loss caused by volcanic blasts, airborne shockwaves, ash, dust, or lava flow. Fire or explosions resulting from volcanic eruptions may also be covered under these policies. It is important to note that policies may vary in their wording and specific exclusions, so homeowners should carefully review their policies and consult with local insurance agents to understand their coverage.

For example, if lava causes a fire that damages a home, it may be covered as a fire peril under the homeowner's policy. Additionally, damage to vehicles caused by lava flow is typically covered under auto insurance policies with comprehensive coverage.

However, most homeowners insurance policies do not cover damage resulting from earthquakes, landslides, mudflows, earth tremors, or other earth movements, even if they are related to volcanic eruptions. Flood damage is also generally excluded from homeowners insurance policies, but it can be obtained separately through the National Flood Insurance Program.

Hawaii residents with concerns about their insurance coverage for lava flow damage can reach out to the Insurance Division using a dedicated toll-free number. It is recommended that homeowners with insurance keep their policies in a safe place, document their belongings, and remove their belongings from their homes if possible, as lava flow may cut off access.

Commercial property insurance policies and auto policies cover volcanic eruptions

Commercial property insurance policies and auto insurance policies typically cover damage from volcanic eruptions and lava flow. However, it is important to note that there may be exceptions, and not all policies are created equal.

Most commercial property insurance policies will cover losses from damage caused by ash, dust, and other particles resulting from a volcanic eruption. For example, if lava flow started a fire in your home after a volcanic eruption, the fire damage would likely be covered by your insurance policy, even if volcano coverage was not explicitly included. Similarly, damage caused by a direct blast, such as a volcanic eruption or lava flow, would also be covered. Some policies may also cover the cost of cleaning up ash.

However, it is important to understand what is typically excluded from coverage. Damage caused by landslides, resulting land tremors, earthquakes, and flooding are generally not covered, even if they are a direct result of a volcanic eruption. To ensure you are protected from these perils, you may need to purchase supplemental policies, such as earthquake insurance, flood insurance, commercial auto insurance, or business interruption insurance.

When it comes to auto insurance, comprehensive coverage will usually cover direct, sudden damage to your vehicle caused by a volcanic eruption. If your car crashes during or after a volcanic eruption, it will typically be covered under the terms of your policy, just like any other crash. However, expenses incurred for preventive measures are generally not covered under auto policies.

It is always a good idea to review your specific insurance policy or consult with your insurance agent to understand the exact coverages and exclusions for volcanic eruptions and their effects, such as fire or explosion. Additionally, creating a home inventory of your personal property can be extremely helpful in confirming you have adequate coverage and can expedite the claims process in the event of a loss.

Earthquake and flood insurance are not included in volcano coverage

While volcano insurance is not a separate type of insurance, damage from volcanic eruptions is sometimes included in a homeowners insurance policy, commercial property insurance, commercial auto insurance, and other business insurance policies. However, it is important to note that earthquake and flood insurance are typically not included in volcano coverage.

In the case of an eruption, most property insurance policies will cover losses from damage caused by ash, dust, and other particles. For example, if lava flow starts a fire in your home, the resulting fire damage will likely be covered by homeowners or business insurance policies, even if volcano coverage is excluded. They will also cover damage from a direct blast, such as a volcanic eruption and lava flow.

However, damage caused by landslides, resulting land tremors, earthquakes, and flooding is typically excluded from coverage, even if it is a direct result of a volcanic eruption. These types of damage require supplemental policies, such as earthquake insurance and flood insurance.

It is recommended that individuals living in areas with active volcanoes, such as Hawaii, review their current insurance policies to understand their coverage in the event of a volcanic eruption. While living in a high-risk zone may limit insurance options, some insurers, like Lloyd's of London, offer policies that include volcano coverage.

Lloyd's of London offers policies for those in high-risk zones

While there is no such thing as volcano insurance or lava flow insurance for Hawaiian residents, Lloyd's of London does offer policies for those in high-risk zones. Lloyd's, the world's leading marketplace for insurance and reinsurance, provides innovative risk solutions to help people and businesses build confidence and resilience. They work with private and public sector partners to protect against risks that could arise after a volcanic eruption, offering economic protection and enabling the mobilisation of emergency response resources.

Lloyd's offers a range of insurance products to support those affected by volcanic eruptions, including property insurance, aviation insurance, travel insurance, and agriculture insurance. Their products can help with risk management and reduce future vulnerability to volcanic risks. Lloyd's is committed to furthering their understanding of volcano risk and has conducted research to enhance their insight into the impact of volcanic ash fall on different types of buildings.

In addition, Lloyd's has supported tailored risk transfer mechanisms for disaster relief efforts, such as the International Federation of Red Cross and Red Crescent Societies' Disaster Response Emergency Fund (DREF). This fund provides life-saving assistance to vulnerable communities experiencing various disasters, including volcanic eruptions.

However, it is important to note that Lloyd's of London has faced criticism and legal action in Hawaii. A federal class-action lawsuit was filed against Lloyd's, alleging that they deceived Hawaiian homeowners by steering them towards surplus lines insurance instead of more comprehensive state-established coverage. The lawsuit claims that Lloyd's policies were "virtually worthless" and did not provide coverage for losses suffered due to the Kilauea Volcano eruption.

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