March 23, 2023
Items that are (Probably) not Covered by Your Homeowner's Insurance Policy
Homeowner's insurance is an essential aspect of homeownership, as it provides financial protection against various risks and hazards that can cause damage or loss to your property. However, not all of the risks that we face owning a home are covered by a typical home insurance policy.
In the insurance world, a "peril" is an event or circumstance that is the cause of damaged property. If a covered peril is the cause of damage, your insurer will pay to repair, replace, or rebuild your home less your deductible costs. Your homeowners, condo, or renters policy will contain a list of perils it covers, such as fire, lightning, and vandalism. In this article, we'll be looking at the various dangers and specific items that are not generally covered in a home insurance policy, provide some valuable sources to help you understand the limitations of your coverage, and give some alternatives to protect you.
Floods are common natural disasters that can cause extensive damage to homes and property. Unfortunately, most standard home insurance policies do not provide coverage for flood damage. If your homeowners insurance policy does not cover flood damage, and especially if you live in a flood-prone area, you may need to purchase a separate flood insurance policy from the National Flood Insurance Program (NFIP) or from one of many private insurance companies. Flood insurance can provide financial protection against damage caused by rising water, whether from a natural flood or a broken water main.
Earthquakes are another natural disaster that can cause significant damage to homes. Earthquake insurance can provide financial protection helping cover repair and replacement costs against damage such as cracks and foundational damage caused by earthquakes, including shaking and ground movement. Like floods, most standard home insurance policies do not cover earthquake damage. If you live in an area that is at risk of earthquakes, you may need to purchase a separate earthquake insurance policy. These can be obtained from many private insurance companies.
Wear & Tear, and Maintenance Issues
Home insurance policies generally do not cover the damage caused by normal wear and tear, nor does the policy cover maintenance issues, such as repairing a broken air conditioning unit or fixing leaky faucets. For example, if your roof starts to leak because of age or if your water heater breaks down due to normal wear, you will likely have to pay out of pocket for the repairs or replacement of these old items. To make up for the lack of coverage of wear and tear and the various maintenance issues in your household, you should first take an active role in maintaining your home by performing regular inspections and completing necessary repairs and maintenance tasks as soon as possible; this will prevent larger and more costly problems from happening. It is also recommended that homeowners set aside money in a maintenance fund to cover the costs of repairs, replacements, and maintenance issues from the time of purchase. How much you put into this fund will depend on the age and current condition of your home. Professionals generally recommend setting aside 1% to 4% of the purchase price of your home.
Additionally, you may consider purchasing a home warranty, which can provide coverage for specific appliances and home systems that break down due to normal wear and tear. If interested in such a policy, read it very carefully, taking note of what is covered and what is not, along with any deductibles. Also, look for reviews of the particular home warranty company before buying. If their customer service receives terrible reviews, you may want to search for a different policy.
The intentional acts peril, includes damage caused by vandalism, arson, or other acts. If you, or more likely, someone else in your home, intentionally causes damage to your property, your home insurance policy will not cover it. To compensate for the lack of intentional acts coverage, you can take steps to secure your home, such as installing a high-quality security system like ADT, and locking doors and windows when you're not home. Also, consider purchasing a personal liability insurance policy, which can provide financial protection against legal and medical expenses if you or someone in your home is responsible for causing damage to someone else's property.
If you run a business from your home, be aware that your home insurance policy will probably not cover any damage caused by your business activities. For example, if you run a daycare from your home, and a child breaks a window, your home insurance policy will likely not cover the damage. To make up for the lack of business activities coverage, you should consider purchasing a business insurance policy; these policies can provide financial protection against losses caused by your business activities. A business insurance policy can cover things like employee and business liability, property damage, and loss of income.
While not a peril, high-value items such as jewelry, art, and collectibles may not be fully covered by the standard home insurance policy, you may want to purchase a separate insurance policy or endorsement called a "rider," to provide full coverage for these items.
Mold growth and related damage are often excluded from coverage or subject to specific limits under a standard home insurance policy. However, your standard homeowners insurance policy may cover a mold claim if the growth resulted from a covered peril that is sudden or accidental. Separate mold riders can also be purchased.
Any loss or damage caused by power outages is typically not covered by a standard home insurance policy. You can always purchase a backup generator to prepare for a power outage.
Sewer or Drain Backups
Damage caused by sewer or drain backups is also often excluded from coverage or subject to defined limits under a standard home insurance policy. Know your limits; if they are insufficient, you can add additional coverage to them.
Damage caused by pests, such as termites or carpenter ants, is typically not covered by a standard home insurance policy. Prevention is the best solution and can be done with a regular pest service.
Nuclear Events, War, or Acts of Terrorism
Damage caused by nuclear accidents or events, such as a nuclear meltdown, as well as war, acts of terrorism, or civil unrest, are typically not covered under your standard homeowners insurance policy. Nuclear events are usually insured by the owners of US nuclear power plants, and war is generally not considered insurable, but these perils can be insured in some situations.
Your homeowners insurance provides you with important protections. It's important to keep in mind that these uncovered items and their alternatives are not one-size-fits-all solutions. The best alternative for you will depend on your specific needs, circumstances, and the risks you face. It's important to carefully review your home insurance policy to understand what is and what is not covered. If you're concerned about specific risks, have questions about your coverage, and before making any decisions to change coverage, it's always a good idea to speak with a trusted insurance professional for personalized advice and guidance.