Top Exclusions Found in Your Homeowners Policy

Buying a homeowner’s insurance policy is an important aspect of protecting your home from major monetary loss. Whether you experience a theft or fire, you want the insurance company to pay for damages without requiring major out of pocket costs.

For example, every 13 seconds a home burglary takes place, with over 2,000,000 occurring annually. A homeowner’s insurance policy has you covered. They also pay for damage to personal belongings and injuries occurring on your property.

However, the policy does not cover every peril, or loss homeowners face. Understanding what your policy will and will not cover will help you protect against the events most likely to occur in your home based on your location and circumstances. This article will discuss the most common exclusions found in homeowner’s insurance policies, allowing you to purchase additional coverage if you feel the need for protection from listed exclusions.

Floods and Water Damage

Every day 14,000 Americans experience an emergency from water damage at home or work. Nationwide, 98% of basements will suffer water damage at some point. Even the tiniest leak can generate a large amount of damage to a home. For instance, a running toilet can waste 200 gallons of water every 24 hours. A small drip under the sink can ruin a cabinet, and the flooring underneath, if not corrected early.

A standard homeowner’s insurance policy offers limited coverage from water damage. The average policy will not cover a slow leak or a weather-related flooding. However, they will cover a sudden water occurrence such as a burst pipe or a water heater springing a leak. If you wake up to a flooded kitchen, they will likely pay the claim. If your roof leaks and you do not notice it until the water damage appears on the ceiling, they will typically deny the claim.

Lenders can require additional flood insurance if the home is in a nationally designated flood zone. Consider buying additional insurance on any home located near a water source. You can buy a flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer.

Construction Injuries or Damage

Homeowner’s insurance policies do not include coverage occurring because of a construction project or home upgrade. The contractor should carry a policy called builder’s risk coverage, which will include loss or damage to materials, fixtures, workers, and equipment used during the installation.

Valuables

Most homeowners policies will only pay between $1,000 and $2,000 for lost or damaged jewelry and up to $2,500 for a stolen firearm. Owning expensive jewelry, guns, art, or collections require additional coverage. Insurance companies frequently require a third-party appraisal to establish coverage limits on valuables.

Earthquakes

When you think of earthquakes, California comes to mind. However, there are 16 states at high risk of earthquakes:

  • Alaska
  • Arkansas
  • California
  • Hawaii
  • Idaho
  • Illinois
  • Kentucky
  • Missouri
  • Montana
  • Nevada
  • Oregon
  • South Carolina
  • Tennessee
  • Utah
  • Washington
  • Wyoming

Scientists measure the strength of earthquakes on a scale of 0 to 8+. In 2016, 16 earthquakes ranged from 7-7.9 magnitude. In California alone, there are over 10,000 earthquakes each year. Annually an average of 4,701,156 people experiences the impact of an earthquake, yet the typical homeowner’s insurance policy does not cover damages unless you buy a rider or separate policy.

War

Any declared act of war voids coverage on most homeowner’s insurance policies.

Nuclear Accident

Most Americans reside within 50 miles of a nuclear power plant. However, insurance companies do not cover damage from leaks or accidents.

Sinkholes

Home construction on unstable land has increased the number of sinkholes experienced across the US with forty percent of the United States lying in areas where sinkholes can develop. Sinkholes are a hole or depression in the ground caused by a collapse in the surface layer and are more common in the following seven states:

  • Alabama
  • Florida
  • Kentucky
  • Missouri
  • Pennsylvania
  • Tennessee
  • Texas

Some states with a high frequency of sinkholes, require policies to cover the peril. However, in most standard policies, companies do not cover damage caused by an earth collapse under your home.

Landslide

Damage from landslides cost over 1 billion dollars annually, yet insurance companies do not pay for losses under most homeowner’s policies. Landslides occur all over the United States when erosion causes the earth to give way, affecting homes below the eroded earth. According to the Geological Society of America, landslides cause 25 to 50 deaths annually.

Alaska, California, Hawaii, Oregon, and Washington have higher levels of landslides than other states. Depending on the home’s elevation and surrounding geography you might consider purchasing additional coverage in the event of damage from a landslide.

Mudslides or landslides are not covered by homeowner’s insurance because they are considered earth movements, just like earthquakes and sinkholes.

Intentional Loss or Negligence

Intentional damage or negligence of the property can lead to a denied claim. The company could also refuse to renew a policy if they suspect property neglect.

For instance, frozen pipes are a common occurrence during the winter months and can cause water damage when a pipe burst. Pipes can freeze due to many factors which include setting the thermostat too low, poor insulation, or a rapid drop in temperature.

For example, failing to insulate the pipes in crawl spaces and attics or sealing leaks to prevent frigid air from reaching the pipes could be classified as neglect. Trying to thaw pipes with a torch or flame could classify as intentional damage if your actions start a house fire.

Conclusion

Homeowners buy insurance to protect against financial loss based on the most common risks to your home. Not all insurance companies offer the same coverage. Knowing the most common perils in your area and the risks of damage you are likely to experience will help you decide on the right amount of coverage. If you need coverage for an excluded peril, you can typically purchase a rider to the existing policy or add a separate policy to obtain the coverage you need.

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