To be quite honest, I never used to know what our homeowner’s insurance actually covered. We were in the midst of buying our first home in 2009, and I only knew that I had to have it. Because of the time crunch (once we had found the home we wanted), we did not even take time to shop around with our first insurance policy. Instead, we paid on a plan at an exorbitant price until we could breathe again and had the time to shop around (effectively lowering our rate by close to $500 per year for better coverage).
Surprising Things Your Homeowner’s Insurance Won’t Cover
Thankfully (knock on wood), we have had no claims on our policy thus far. However, I did have a question a few weeks ago about whether or not something would be covered, and talked with my rep on the phone about it. The phone call was enlightening, and ever since I wanted to look further into what homeowner’s insurance policies generally won’t cover.
This one I knew from the beginning, because of the huge marketing campaign from the National Flood Insurance Program. We do not live on a flood plain (if you do, then you are required to carry flood insurance), but we do live in Houston which happens to be only slightly above sea level. Several times I have watched the water rise halfway up our lawn (thankful that we had paid the several hundred dollars for flood insurance), only to watch it recede again. But you never know!
Building Code Compliance Issues
We had a plumber come to our home who checked out a few things for us about eight months ago. Fortunately there were no major issues. However, while he was there he took a look at our water heater and found that it was installed completely out of code. In fact, there is a pipe on the top that is supposed to go to the outside and it goes…nowhere. Yikes! Unfortunately, homeowner’s insurance covers homes as they are, and does not generally cover upgrades for building code compliance issues. Even so, getting this fixed in our home likely will not cost more than our deductible anyway.
Home Business Issues
If you run a small business out of your home—seeing patients, for example—your homeowner’s insurance generally will not cover accidents, losses or damage directly related to it. This also means that your business equipment, such as computers, fax machines, copiers, printers, etc. may be underinsured or not insured at all (even though it seems like it would be under “possessions”).
This is typically the case even if you telecommute and work for someone else.
I felt my first earthquake ever when I studied abroad in Japan. Japan frequently has earthquakes, and the buildings there are generally set up to withstand the shaking. One afternoon as I was walking into my kitchen, everything started to shake. I didn’t realize what it was at first (I am from the Northeast and in my childhood we generally only received small tremors). Still, I stood in the nearest doorway (is that what you’re supposed to do?) with a smile on my face, glad to have experienced more of Japan’s culture.
Did you know that typical homeowner’s insurance policies do not cover damage to your dwelling caused by earthquakes? You can usually purchase extra insurance within your policy to cover things like cracked foundations, broken glass, cracked walls, plumbing issues, etc. Even if you already purchased this extra insurance, earthquake plans typically have huge deductibles: 10%-15%.
Most pest infestations and the damage that they cause are considered maintenance issues by your insurance agent. And guess what? Homeowner’s Insurance policies do not typically pay for issues that could have been avoided by proper maintenance. However, collateral damage caused by a pest infestation may be covered. For example, if termites eat through a structural beam, causing something to collapse in your home, the part that collapse would probably be covered.
Other common events that are not covered by “normal” homeowner’s insurance policies include landslides, floods, mine subsidence, mud slides, mud flows, volcanic eruptions, surface water, sewage and a long list of other problems. If any of these issues discussed describe your situation or leave you with heartburn, then speak with the company who holds your homeowner’s insurance policy. Ask if they have additional policies or riders that you can add onto your current policy in order to cover what you need. If your current insurance company doesn’t offer the coverage you need, shop around and find an insurance company that provides the coverage you need.