Don’t Be Surprised: What Home Insurance Does and Doesn’t Cover
The recent damage in the Northeastern United States, caused by Hurricane Irene, taught an unfortunate lesson to many flooded homeowners. Typical home insurance policies do not cover damage caused by flooding. This caught many people by surprise.
What Your Home Insurance Doesn’t Cover
To avoid surprises in the future, here is a short list of other damages that most homeowners policies also do not cover:
- Earthquakes, landslides or mudslides
- Sewer related damage
- Identity theft
- Dog bites
- Recreation equipment like swimming pools and trampolines
- Damage relating to a business you run from your home
Items with Limited Coverage
There are also items your policy may cover partially but with lower limits of coverage. These include mold and mildew, specific personal property like jewelry, firearms, computers and other electronics, as well as maintenance or upgrades of your home’s electrical, plumbing or other building code related items.
If you have a need for greater coverage, most insurance companies will provide coverage in exchange for a higher premium. You may purchase coverage through a home insurance rider or a separate policy.
For example, homeowners who want flood coverage may be able to purchase flood Insurance through The National Flood Insurance Program. Generally, termite coverage is also purchased through a separate policy.
What a Traditional Home Insurance Policy Actually Covers
So you may be thinking, what does a typical home insurance policy cover?
Most homeowners insurance policies cover damages to your house and other structures, personal property (limited) and loss of use (due to repair). If someone is injured on your property, most policies also provide personal liability and medical coverage to the injured party.
Insurance companies use the word “peril” to describe the specific cause of damage to the property. Perils such as those caused by wind, hail or lightning are covered. Most policies also cover damages from fire or theft.
All insurance companies in the United States are overseen by the individual states, not the Federal Government. The National Association of Insurance Commissioners (NAIC) is the oldest association of state government officials and itsâ€™ membership includes the chief insurance regulators in all 50 states.
These regulators are primarily responsible for protecting the interests of consumers, like you. The NAIC has a list of the regulator, with contact information, for your state. They also provide a website loaded with free consumer resources including educational material on home, auto, life, annuity and long-term care insurance.
For a free guide to homeowners insurance, visit www.naic.org and download their Consumerâ€™s Guide to Homeowners Insurance.
PAUL E. PUCKETT, JR. is the author of Investiphobia: Overcome Your Deepest Investment Fears. Over the course of his career in financial services, Paul has been a bank loan officer, private banker, trust officer, broker and continues to work as an investment advisor and insurance agent. He has contributed articles to numerous blogs, is an experienced speaker and is available to answer your questions on any personal finance topic.
Paul is the Founder of the Whole Investor Network, Portfolio Manager for 1st Quadrant Asset Management, and host of the video podcast, Getting There. His focus is helping investors and advisors eliminate fear from their investment decisions.