Think of home insurance as body protection for your house. Not all policies are equal though. Sometimes there are chinks in the armor. These are the insurance exclusions and they may mean you’re not covered in certain circumstances.
The best course of action is always to read the small print thoroughly. The last thing you want is a nasty shock when something goes wrong. Here’s what to watch out for.
1. Perils and Insurance Exclusions
There are several types of standardized home insurance policy. For example, an HO-2 policy would cover your house and its contents against sixteen different types of perils or dangers.
An HO-3 policy, on the other hand, would cover the structure of your home for all perils except those specifically excluded. Your home’s contents would be covered against the perils named in the policy. HO-4 renters insurance is different again.
A peril is simply the term used for a danger that may cause damage to your property. This could range from fire to damage caused by aircraft. The freezing of plumbing, heating or air conditioning systems could also be considered perils.
What’s important is to ensure your policy covers you for the perils you’d like protection from. For example, if you live in an area where burglaries are common then you might want ‘theft’ to be an integral part of the policy.
2. Fraudulent Claims
There will always be an exclusion in your policy which attempts to stamp out fraud. Insurers will be reluctant to consider claims if a customer has wilfully or deliberately damaged the property.
It’s possible that someone would do this for a cash benefit or as a way to pay for costly home improvements. There have been instances when people have set fire to their homes on purpose as a way of ‘cashing in’ on their insurance policy.
Such cases are rare but if they go uncaught they could have a detrimental effect on the cost of all policies. If you use the home for criminal activity such as the manufacture of illegal drugs then insurers could deny a claim.
3. Maintenance Issues
Policies are not designed to cover issues that result from general wear and tear. It is up to the homeowner to take reasonable care of their house. The insurance is for sudden or accidental damage rather than poor maintenance.
You should not think of home insurance as an alternative to a home warranty. It would not be the insurer’s responsibility to make sure the home was constructed properly, for example.
Home insurance policies would exclude problems related to poor workmanship. They might also exclude damage from things like rot and condensation. Your policy may not cover you for damage from pipes that burst due to inadequate protection.
These kinds of exclusions can vary a great deal between different insurers. You should always check the language of your policy to make sure you’re protected.
Even if you’re covered in the event of a theft at the property, you should check to ensure you have taken the required precautions. This could include having the correct locks on any windows or doors, and the need for an alarm system.
4. Damage Caused by Pests
Rats, mice, insects and other kinds of creatures can all cause damage to property. This can sometimes happen over a long period of time without you even realizing that it’s happening.
It is normally a rule that you maintain your home to stop this kind of issue. It would be no use to simply wait for any damage to get bad enough to make a claim.
Bedbugs, and particularly termites can render a home unsafe or unfit for habitation. But, in the eyes of an insurance company this type of problem falls into a similar category to maintenance.
That would mean it’s up to the homeowner to get rid of any infestations and to fix any damage that may result from them.
5. Dangerous Dogs
Bites from dogs along with other dog-related injuries are all too common. In 2017 they accounted for more than one in three of all homeowners liability claims. That came in at a cost to insurers of nearly seven hundred thousand dollars.
It may be that you’re not covered for every dog-related injury. Some policies may exclude dangerous or aggressive dogs. Breeds that have a reputation for causing injury could be on a blacklist.
Injuries caused by Pitbull terriers, Rottweilers or wolf hybrids are often excluded. Some policies may also have clauses in them which would take into account any aggression in the dog’s history regardless of the breed.
You should always inform your insurer if you own a dog. Should it have the potential to be aggressive you may be able to mitigate an exclusion by proving that you have trained and socialized the animal.
6. Floods and Earthquakes
If you live in a region that’s prone to flooding from rivers and rain then you would need to buy extra flood insurance. Your policy may include protection for issues that crop up from water or sewage overflows, however.
Your policy may exclude damage due to mold in certain instances. This could include occasions when problems are as a result of long-term leaks. Poor home maintenance or naturally occurring floods may also mean exclusions.
Landslides, earthquakes, or sinkholes aren’t generally covered under home insurance. The states of Florida and Tennessee are exceptions though when it comes to sinkholes.
If you live in a state that is prone to these types of natural disasters then you would need to buy a separate policy. It’s always wise for you and your family to have a plan to put into place in the unlikely event that disaster strikes.
Understanding the Risks
Always check your policy. Spend a bit of time to ensure you are happy with any insurance exclusions and you’ll be able to sleep better at night. A home insurance policy will be a requirement of your mortgage lender.
Read here about insurance myths to help you get to grips with the type of policy that’s right for you.