Check your existing policy for these exclusions before assuming your current insurance company has you covered.
Some aspects of your home insurance policy are easy to understand, like rates and deductibles. But there might be limitations or omissions that could have a sizable price tag. Most people buy homeowners insurance policies because their mortgage lender requires it. But, the fact is that the lender is trying to help the homeowner stave off unexpected expenses from accidents, weather emergencies, fires, and even liability claims that could put their home, and financial future, in jeopardy. That said, even if you’ve paid premiums for many years, there are a number of loopholes and processes that could still end in a denied claim. Below are five things that homeowners insurance typically doesn’t cover.
Acts of God
According to CNBC, “water damage accounts for more than 19 percent of the total home insurance claims.” You’d assume that if the damage is that common, then of course your insurance company would pay out. Not so. The companies start by investigating how the water got there in the first place—was it a storm, flood, pipe burst, sump pump backup, roof damage? Standard home insurance policies may have exemptions for certain “Acts of God” that might have triggered the water damage.
Ian Gutterman, the CEO of Informed Insurance, says that “while [water damage] gets a lot of [attention] after every big hurricane or flood, many people still don’t understand that a flooded basement is not covered.” Even more surprising, he says, is the lack of roof coverage. “Many insurers now ‘depreciate’ roofs, meaning as your roof gets older you get less coverage and that can leave you facing a large bill,” he explains.
“Acts of God” is a catch-all phrase to include earthquakes, floods, and other uncontrollable incidents that could cause damage. To cover these kinds of issues, homeowners must pay for additional coverage. For example, there is FEMA flood protection if you live in a flood-prone area and tornado insurance against windstorm damage. To be sufficiently protected, you’ll need to understand the weather vulnerabilities in your region and consider paying for these additional riders if it is likely that your home could be affected by one of these incidents during the time you plan to call your house a home.
Gutterman warns that even if you have all the coverages you believe you need, it is important to check for wind and storm deductibles. “These are in many policies now and are rarely proactively disclosed by agents,” he says. “They are often 1 or 2 percent of your home’s value, so a $500,000 house has a $5,000 or even $10,000 deductible, when you thought you had a $1,000 deductible.” You’ll have to read your policy’s fine print to see if weather events have different deductibles from the general deductibles outlined in the standard policy documents.
Bugs, pests, and rodents
Imagine carpenter bees have buzzed their way into the attic and built a hive that will cost thousands to treat. Your family might not even be able to stay in the home for a few days while these pests are evicted—but who will cover the treatment and temporary housing? Likely, the answer is you.
Trade bees for wasps, termites, rats, squirrels, birds, and any other creepy-crawly things that could make themselves cozy in a crawlspace, porch, awning, gutter, chimney, or another corner of your property. The situation can end in extensive damage and expensive bills that many insurance companies will not cover.
Pest infestation can be seen as negligence on the part of the owner, who could have called a remediation company earlier or with greater frequency. Regular maintenance of your home should help avert infestations, but four-legged and winged intruders are something to keep in mind if you plan to leave your home vacant for long stretches. An insurance company isn’t likely to reimburse for repairs and abatement.
Similarly, if your domesticated pets harm others on your property, insurance companies are also likely to deny claims. Dog bites, in particular, are a bone of contention. But the same is true for cat scratches and damage to fences and other adjoining spaces.
The cost to rebuild your home
According to survey results from Marshall & Swift/Boeckh, nearly 60 percent of homes in the U.S. are underinsured by at least 18 percent. A homeowner insurance policy is typically designed to cover the costs of rebuilding your house. But that figure changes over time. If your home is in a historical district, for example, rising construction costs and tougher building codes could make an exact replacement impossible. A typical home insurance policy allows 10 percent of your dwelling coverage towards the extra expenses of modern building codes, but policies vary.
Similarly, if you’ve made upgrades and significant repairs to your home, then it’s important to update your insurance policy to reflect those changes. Otherwise, the policy is likely pegged to the costs associated with your purchase of the home, not its true value many years later.
According to Andrea Collins, home insights expert at Hippo, service lines are also out of bounds on most insurance policies. “While the pipes inside your house are covered by your homeowners insurance policy if they leak or burst, typically service lines on your property aren’t,” she says. “Financial costs can add up quickly for a burst pipe on your front lawn, so be sure to ask your provider if it’s included in your coverage limits, or look for an insurance provider that offers it as an option to purchase with their policy.” This is less an issue for people living in condos or big buildings, but for folks living in single-family homes, this is a major concern.
Look into the condition of the existing service lines even before you buy the home by asking for detailed inspections of sewage lines and other drainage systems. Often, damage detected before a sale can be offset by the seller’s credits or repairs at the seller’s expense, before closing.
Faulty safety and security systems
Richard N. Estrella, director of operations at Estrella Insurance, advises that homeowners get all the discounts they are entitled to. One way to do so is to share with your insurance company if you’ve installed safety and security systems like hurricane-proof doors and windows, security systems and cameras, fireproof electrical systems, etc. (Some insurance companies offer discounts of up to 15 percent for having a home security system.) Remember, though, if you say these things are in place, you’re expected to keep them there throughout the life of your coverage.
A missing smoke detector, faulty sprinklers, and a disabled security system could all be used to deny a claim that might otherwise have been covered. Those initial insurance discounts can be valuable, but these systems and auxiliary items are subject to natural deterioration that is easily forgotten or delayed on a homeowner’s long list of to-dos. Keep a checklist of these necessary maintenance tasks to ensure that your coverage remains secure.
Nafeesah Allen, Ph.D. Real Simple