In almost all cases you will buy a homeowner’s insurance policy before the closing on a home purchase. Mortgage lenders require that borrowers have the property insured up-front with the annual premium cost. But a standard homeowners policy isn’t a one-size-fits-all solution. The home is covered for multiple perils, but there are important exclusions. Understanding what is not covered by homeowners insurance and addressing those gaps will save you money and emotional distress later down the road.
Coverages Not Included On A Homeowners Insurance Policy
Known also as an HO-3, a standard homeowner’s insurance policy covers fire, lightning, wind, hail, and other perils on homes and related structures. Certain property in the home and injury or damage liability for visitors and guests are also covered. About 80 percent of homes in the U.S. have a homeowner’s insurance policy. There are specific exclusions that require homeowners to seek other policies to provide protection.
How much additional coverage you need for your home typically comes down to three determining factors:
- Lender Requirements – When seeking a mortgage, lenders will require that you obtain homeowner’s insurance. The minimum coverage that’s typically required is for the amount of the mortgage. This is in the interest of the mortgage lender in case a catastrophic event like a home fire occurs, resulting in a total loss. The remainder of your mortgage balance can be recouped by the lender.
- Policy Requirements – You might be required to purchase additional coverage for certain perils depending on requirements set by your insurance company. For example, if you live in an area that is prone to flooding, they may require you to get flood insurance.
- Asset protection – Your out of pocket costs when an unexpected event occurs depends on your premium choice. The lower your premium, the less financial help you will receive. If you have considerable assets that you don’t wish to risk in a lawsuit, you may choose to have more liability insurance so that if you are sued, your assets are better protected.
Earthquakes, Floods & Hurricanes
Earthquakes, landslides, other types of earth movements, and floods, including hurricanes, are major exclusions found in standard homeowners insurance policies. Mudslides and earth shifts that cause damage are also excluded. Special earth insurance may be required for homeowners residing in high-risk areas, and it can be offered as either an add-on to a standard policy or its own separate insurance.
Interior problems that cause flooding are typically covered in a standard policy. Examples include an overflowing toilet or leaking pipe. But flooding that stems from external conditions is excluded.
The other major natural peril that’s excluded is damage from floods. This damage could be due to a variety of incidents, including heavy rain, storms, or overflowing drains. You might be required to obtain flood insurance if your home is located in a high-risk area. 30 percent of floods occur in low-to-moderate risk flood zones, which makes the case for homeowners to strongly consider it.
Protection from flooding, which includes mudflow, is provided through a separate policy. Insurance companies provide these policies through the government-run National Flood Insurance Program.
Routine Maintenance & Insect Damage
The repair and maintenance of the property is another exclusion of standard homeowners’ policies. This includes problems such as rot, mold, failure of equipment resulting from normal wear and tear or mechanical breakdown, termites, and insect infestations. Neglect and improper maintenance of the property are typical causes of these issues.
If you experience a power outage and the food in your freezer or refrigerator goes bad, those types of losses are not covered. War and nuclear hazard damages, though unlikely events are also not covered.
Costs Associated With Government Actions
Let’s say that there is a change in local regulations that require that a home is brought up to building code for wiring and construction after it has been damaged. The basic damage is likely covered, but these changes are not.
The way that most policies are constructed is that they cover the “actual cash value” for damages. The ACV is the value you get after subtracting the depreciation of the damaged property from the replacement cost. That means the actual value is always going to be for less than how much it would cost to replace it.
Expensive Personal Items
Jewelry, furs, artwork, watercraft, boats, and other expensive personal items are considered special exclusions from a standard homeowner’s policy. There is limited coverage for jewelry for up to $1,000 on a standard policy. That’s also the amount that is covered for a stolen boat if it was located at the home. However, there is no theft coverage if the watercraft was somewhere else when it was stolen. Liability coverage is not available for boats with a motor that’s over 25 horsepower.
Speak To An The Experts About What Is Not Covered By Homeowners Insurance
To learn more about policies what is not covered by a standard homeowners insurance policy and to review your options, contact us today. Our Insurance experts are available at 407.707.6418, or you can request a quote online.