You're not off the hook
When you take out a mortgage, you commit to paying that loan back until its balance is whittled down to $0. This obligation exists whether your home is livable or not. Similarly, it exists whether your home is standing or not.
Of course, the risk of not paying a mortgage is having your home foreclosed on. If your home is no longer standing, you may be inclined to just default on your mortgage and let your bank take your non-existent home away. But one consequence to foreclosure is extensive credit score damage.
A foreclosure typically stays on your credit report for seven years. During that time, you might struggle to not only get a new mortgage, but borrow money in general. And since landlords tend to perform credit checks on prospective tenants, you may struggle to rent a home following a foreclosure.
Similarly, you’re still on the hook for homeowners association (HOA) fees if your home is destroyed. Blowing those off could eventually lead your HOA to foreclose on your home, causing the same credit score damage as a bank-driven foreclosure.
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Learn MoreWill homeowners insurance pick up the tab?
While homeowners insurance policies may cover storm damage, some natural events are often excluded. Flood damage is generally not covered under a regular policy unless there's a separate flood rider added on. Similarly, earth movement events like earthquakes and landslides are usually excluded from standard homeowners insurance policies.
It may be possible to buy a difference in conditions (DIC) policy that covers the aforementioned events. In that case, if your home is destroyed, your insurer may cover the cost of replacing it.
But if you don't have a separate policy covering landslides, you shouldn't expect your homeowners insurance company to pay following one. And in areas that are prone to landslides, a DIC policy may be hard to come by.
Your options following a landslide
If a landslide destroys your home and your insurance policy won’t cover the damages, you could be in for a financial blow. But there may be ways to soften it.
First, see if your mortgage company will at least allow you to put your loan into forbearance. This gives you the go-ahead to pause your monthly payments without being flagged as delinquent. And it buys you some time to figure out your next steps.
You may also be eligible for government assistance, depending on the situation at hand. The Federal Emergency Management Agency (FEMA), for example, provides assistance to eligible households impacted by natural disasters.
You may be entitled to funds through FEMA to cover temporary housing or be given a temporary housing unit to occupy, so it definitely pays to apply. If you're not eligible for aid through FEMA, there may be a state agency you can turn to for relief.
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