03 Mar What’s Not Covered by Homeowners Insurance?
Before you move forward with purchasing homeowner’s insurance, it is important to understand what’s covered and what isn’t. Because policies can vary hugely from company to company and state to state, read all the important documents to understand the covered perils.
In this article, we’ll uncover what does homeowners insurance not cover so you can be fully informed about your policy.
What Standard Homeowners Insurance Covers
A standard homeowner’s insurance provides coverage for the physical dwelling, structures installed on the property like a fence, garage, etc., and damages caused by incidents like theft, vandalism, or fire.
What Does Homeowners Insurance Not Cover
Homeowner’s insurance covers a lot of covered perils. However, it is safe to say that it does not cover everything. Large-scale disasters like earthquakes or acts of war are generally not covered by a home insurance policy. Routine wear and tear are also not covered by a standard policy.
The following items are not covered by a homeowner’s policy.
Any damages incurred by large-scale disasters like earthquakes, floods, tsunamis, hurricanes, earth movements, etc., are not covered by a standard home insurance policy. You can, however, purchase additional coverage against earthquakes if your house is located in an earthquake-prone zone. Unless you are in California, a standard policy won’t cover damages by overflowing water from streams, sump pumps, sewer systems, or floods. You would have to purchase additional flood insurance for that.
A separate policy for flood is only provided by the National Flood Insurance Program in the US.
It is important to understand that home insurance is for any damages caused due to unforeseen occurrences. And, therefore, the policy won’t cover you if the damage is caused by routine wear and tear or by an incident that could have been prevented if you had taken care of the property.
Damages caused by termite infestation, bedbugs, sewer backup, molds, water damage, and normal wear and tear are not generally covered by a standard homeowner’s insurance. In the case of termites and other infestations, the only case you will be covered is if the roof falls off.
Furthermore, if you failed to file the claim properly or waited a long time to file a claim, you would probably be denied the claim as the damage would have worsened.
Acts of War and Nuclear Hazards
Any damages caused by acts of war or acts by the government like a seizure and nuclear accidents will not be covered by a standard homeowner’s insurance policy. Terrorist attacks, however, are not considered government activities and are generally covered under insurance.
In case of a nuclear accident, the nuclear plant will be responsible for covering the damages.
In addition to the three clauses stated above, detachable structures like a treehouse, trampoline, and diving boards are also not covered by homeowner’s insurance. Any damages caused by large or aggressive dog breeds are also not covered.
Replacement Cost vs Cash Value
There are several ways through which a company determines the amount it will pay in case a claim is filled. In most cases, the coverage offered is based on either of the two types-
- Replacement cost
- Actual cash value
Here’s how they are different.
A homeowner’s insurance policy with replacement cost would provide the replacement cost of the house without deducting the depreciation.
Simply put, if a part or the whole house is destroyed by a covered peril, you will receive the amount that would help you replace the house without deducting the depreciation.
Actual Cash Value
To put it straight, the actual cash value is the market price of a commodity. This means that the company would pay out the amount that would be required to replace the commodity minus the depreciation.
While a policy with actual cash value can be a little cheaper than a replacement cost policy, it is wise to opt for the latter as the amount received will not depend on depreciation.
What Is Depreciation?
Depreciation simply represents how much a commodity has been used. It is also used to determine the remaining life expectancy of a commodity.
The coverage offered depends upon the type of policy you go for. However, even a basic policy must cover the following things-
Coverage for Home’s Structure
A standard policy will cover any damages incurred by theft, fire, hurricane, hail, lightning, or any other natural event that has been listed in the policy papers. Some policies might also cover detached structures like garages, shed, fence, etc., from these natural events. However, it won’t provide protection against earthquakes, flood, or wear and tear.
While getting a policy, you must ensure to buy coverage that could help you rebuild the structure of the home in case the unexpected occurs.
Coverage for Personal Possessions
If your personal items like furniture, clothes, plants, shrubs, equipment, or jewelry are destroyed or stolen by a covered peril, you are likely to be covered by a standard homeowner’s insurance policy. It is recommended to get a home inventory to know the actual worth of your possessions.
In some cases, the items that are stored off-premises might also be covered. Meaning these items will be covered from anywhere in the world. Besides this, things like jewelry, art, collectibles or art are also covered by a standard policy but usually at a dollar amount. To purchase full coverage, you must purchase additional coverage.
In addition to this, trees, plants, shrubs, and lawns are also covered in case they are damaged or destroyed by a covered peril.
Coverage for Liability
If someone from your house, like a child or your pet, destroys or damages someone else’s property like a lawn, rug, etc., liability coverage will help you cover up the cost of damage caused. However, this clause will not help you cover the bills if your property is destroyed by your pet. This coverage also helps you cover legal fees in case a lawsuit is involved.
Moreover, the policy will also help you cover medical bills if someone, like a guest, is injured at your property.
Coverage for Additional Living
In case your house is entirely destroyed by a covered peril, a standard policy will help you with the rent of living somewhere else until your home is being rebuilt.
Here, it might get a little tricky.
A standard policy will only help you rebuild the house if it is covered at its replacement cost. Meaning, the policy papers state that the company will cover the cost of replacing the house in case it is completely destroyed by a covered peril.
How to Cover Things Not Included With a Standard Policy
A standard policy must provide basic coverage in terms of liability, additional living, and personal possessions. However, you might be located in a place that requires you to opt for extra coverage.
You can include the following types of coverage to upgrade your policy-
Under the National Flood Insurance Program (NFIP), the Federal Emergency Management Agency (FEMA) offers flood insurance policies to homeowners located in high-risk zones. These high-risk zones are maintained by the agency and are at huge risk of floods.
Flood insurance covers the losses caused by water damage due to heavy rain or snow, storm surges, levee dam failure, or blocked storm drainage systems. The pricing for this coverage is based on the property’s age, the number of floors, and elevation.
To set things straight, there is no such thing as hurricane insurance. Instead, there’s a hurricane deductible that you must pay to protect your house from the damages caused by a hurricane.
How to Increase Your Homeowners Insurance Coverage
To ensure that your property is protected, it is recommended to opt for additional coverage options. Moreover, most policies don’t cover the damages caused by earthquakes or land movements.
So, if you are located in a disaster-prone area, it is wise to go for additional coverage. You can ask your insurance provider about the same.
Make Sure You and Your Home Are Protected
The most basic insurance policy offers coverage for personal possessions, liabilities, and assistance for additional living. However, you can opt for additional endorsements according to your needs.
Moreover, before you go for any policy, make sure that it is at its replacement cost and not actual cost value.