Imagine coming home one day to find that lightning has struck the mature tree next to your house, which fell on your garage, causing major damage. Do you know what’s typically covered by your homeowners insurance policy, and would this be included?
Agent Wade Wostal works closely with an insurance agent in his building. He’s seen cases where homeowners thought they’d found a cheaper policy elsewhere, but “there’s too many loopholes out there, there’s too many people out there who do offer coverage and they don’t explain what it’s in the policy,” and the cheaper policy had unfortunate coverage gaps.
When you’re buying insurance, your focus is on protecting your asset, and you might not ask yourself, “what does homeowners insurance not cover?” But, in some circumstances, the answer to that question might matter more!
Chantal Roberts spent 20 years in leadership at major insurance companies educating claims partners and overseeing training before becoming an expert witness for those involved in the insurance claims process. She warns homeowners that despite what an insurance agent may promise, “There is no such thing as an ‘all-risk’ policy. It’s the ‘Everything-is-Covered-Except-What’s-Excluded-Policy,’ which is not nearly as sexy. So, homeowners get very upset when they learn they have exclusions.”
It’s usually best to figure out what’s covered (and what’s not) well before you need to know; we’ve rounded up the biggest things that homeowners think should be covered by their insurance policy…but aren’t.
Homeowners insurance policies and acts of nature
Homeowners insurance companies can’t predict acts of nature — like a lightning strike — and often exempt them from coverage. Therefore, in our example, the cost of tree removal and repairing your garage would be your responsibility. These “acts of God” are forces of nature that man can’t control.
Roberts explains that acts of God are “generally excluded because there isn’t a good way to protect the asset (house) from that peril. You can’t move a house if a hurricane is coming.”
When you bought your house, the seller should have provided you with a natural hazard report, and it could give you some clues to what hazards you might face in your new home.
If you bought a home in a flood zone, you will need to purchase additional protection. Standard homeowners policies don’t cover flood damage. If you have a mortgage on the house, your lender will require you to buy protection through the National Flood Insurance program.
The amount of coverage you’ll need and your premiums will depend upon your new home’s flood zone.
Earthquakes or sinkholes
Standard homeowner’s insurance doesn’t cover earthquake damage or destruction, even if you live in a fault zone. States like California require homeowners to purchase separate earthquake insurance.
If sinkholes open up your property, any damage they cause won’t fall under homeowners insurance unless you bought a sinkhole rider (also called an endorsement).
In some policies, you won’t be able to file a claim for simultaneous natural disasters. For example, you can’t file a claim for both wind and water damage at the same time — which could be a problem if you live in a hurricane-prone area.
Homeowners insurance policies and common home issues
As a homeowner, you’re responsible for routine maintenance. If neglected maintenance leads to damage, under replacement cost coverage you’re reimbursed the damaged item, less depreciation. “If the house is well-maintained, there will be less depreciation taken at the front end of the claim settlement process,” Roberts explains. So, you’d get more money back.
Standard policies cover water damage from burst pipes, but may not replace or repair the pipes themselves. That’s because it’s your job to keep the basement and home warm enough to prevent pipes from freezing. Failed pipes is one of the most common claims issues Roberts has seen in her career, and she warns that “if the pipe is located in a wall, it could get expensive to get to the pipe to fix it (which the homeowner would owe).”
The same rationale applies to sewer backups. If the pipe backs up, your insurer assumes you didn’t perform routine maintenance like cleaning out the pipes and checking for debris.
Pests, including termites, don’t suddenly invade and damage your home. In theory, a homeowner would have time to catch them and treat for pests, so homeowners insurance excludes their damage from coverage.
Improperly ventilated homes, homes with leaking roofs, or damaged foundations can all have problems with mold, fungus, or wet rot. Because a homeowner could prevent that damage, they must pay to fix it.
Homeowners insurance policies and others’ acts
Whether it’s the government, a jealous ex, or a contractor, sometimes the actions of others can unexpectedly damage your house. Unfortunately, homeowners insurance policies exclude these events.
Insurance companies don’t want to be responsible for government actions such as a war. If your government declares war or another country declares war on the United States, and a battle damages or destroys your home, your policy won’t pay out.
Similarly, if the police confiscate your house for some reason, or it’s destroyed or damaged in some government-related activity, your policy will not cover you.
Mischievous acts/malicious mischief/vandalism
If your home has been vacant for some time, your policy stops covering mischievous acts or vandalism.
Construction work damage
What happens if you’re remodeling your kitchen, and the contractor accidentally puts a sledgehammer through the wrong wall? Homeowners insurance won’t cover the cost to patch up the wall, or any other damage done by construction in your home.
New building codes
If you paid for replacement coverage — which would rebuild your house if it’s destroyed — you might think that you’re fully protected. But some policies contain “ordinance or law exclusions,” which create exemptions for insurers around new building codes.
Under these exclusions, insurance companies might not have to pay for the entire cost of rebuilding or replacing your home if the city has passed new codes that require higher-grade or more expensive materials — you could be on the hook for the difference.
If the power goes out for a few hours, or several days, most policies won’t pay to replace the contents of your refrigerator or freezer. However, if the power outage led to burst pipes, they could pay for those repairs.
Some homeowner’s policies do include power outages, so if it’s a concern, read the fine print or talk to your agent.
If your home becomes uninhabitable due to a nuclear hazard, don’t expect your homeowners insurance to help. Policies typically don’t provide reimbursement for any damage caused by nuclear reactions, nuclear radiation, or radioactive contamination.
Homeowners insurance policies and accidents
Accidents happen, which is why insurance policies have liability coverage. But accidents related to high-risk items on your property — such as a swimming pool or trampoline — will often be listed as an exclusion in your liability coverage, and you’ll need to purchase a rider or additional coverage to be protected from accidents involving those features.
As well, if you own certain breeds of dogs, or your dog bites or harms someone else on your property, you’ll have to pay medical bills or the cost of a lawsuit yourself above a certain amount. If you want more coverage, you’ll need to purchase a rider.
Homeowners insurance and high-value items
Insurance policies place coverage limits on your home, car, or valuables. If you own jewelry or fine art worth more than your limits, consider purchasing a rider. Be wary of storing large amounts of cash in your house; if you lose the cash in the home during an event (like a fire), insurance won’t replace it. Unfortunately, there’s no way to prove its existence!
The last word on homeowners insurance
Once a staple of black-and-white movies, you can’t actually set your own house on fire and collect on the policy. Intentional loss and fraud void any coverage you’ve purchased. And if you’re struggling emotionally after a house fire or flood, homeowners insurance also doesn’t offer emotional support or pay for therapy.
While Wostal thinks that the right time to shop for homeowners insurance depends on your homebuying journey, in a situation where money’s tight “if we’re in the middle of the process, and the buyer wants a particular home and doesn’t know if they can afford it, I might suggest they call their insurance company with the MLS information and get a quote.” Buyers looking for homes in areas where certain natural disasters (like wildfires) tend to recur might also want to connect with an insurance agent to see what (if any) coverage options they might have.
Even if this list of non-covered items looks intimidating to you, remember that the chances of many of them occurring are quite slim. If you want coverage for something that’s otherwise excluded, talk to your insurance agent. Insurance companies sell riders to add to your main policy and expand its coverage.
Shopping for homeowners insurance isn’t the most glamorous part of the homebuying process, but taking the time to know what your policy does and doesn’t cover can save you from heartache down the road.
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