Your Home Insurance Won’t Cover This
Your home insurance policy covers a wide range of unusual and unexpected worst-case scenarios, such as meteor strikes and riots.
While you can rest assured that you will be able to file a claim if space debris strikes your home, there are some more common issues that are not covered by home insurance.
While it's important to understand what your policy covers, it's also critical to understand what it doesn't. Here are some common issues that homeowners insurance typically does not cover.
Home Insurance Has Significant Coverage Gaps for Natural Disasters
When it comes to home insurance, one of the biggest and most costly mistakes you can make is assuming your policy covers damage caused by all natural disasters. In reality, depending on where you live, you may require a combination of additional coverage types.
Flood damage, for example, is not covered by standard home insurance policies. Flood insurance must be purchased separately through the National Flood Insurance Program or a private insurer.
And this is where things get complicated, because flooding is also caused by other disasters. For example, earthquakes can cause flooding by causing a river to overflow due to broken dams. However, most earthquake insurance policies exclude flood damage, so if flooding is a concern, you may need to supplement your earthquake coverage with a flood insurance policy.
Hurricanes can be just as perplexing. If you live in a hurricane-prone area, a good hurricane insurance plan should include both flood insurance and home insurance. Residents in some coastal areas must also purchase additional wind insurance.
Because natural disaster coverage can be multi-layered, it's a good idea to consult with a home insurance agent.
Water Damage: It’s Complicated
Flood damage isn't the only type of water threat that can cause significant financial hardship. While most homeowners' insurance policies cover water damage caused by burst pipes, accidental leaks, and roof leaks, other types of water damage are frequently excluded.
Water backups through sewers and drains, for example, are common problems caused by heavy storms, debris causing a clog, sump pump failures, and even a root invasion in your yard.
Water that backs up through a sewer or drain and damages your home, on the other hand, is not covered by a standard home insurance policy. Extra coverage is usually required (sometimes called sump pump and water backup coverage).
Another water-damage wrinkle: Ignorance.
Your home insurance policy requires you to keep your home in good condition. If you don't, your insurance claims may be denied. For instance, if you turn off the heat in your home and a pipe bursts, your claim may be denied. This would be a costly error. According to the Insurance Information Institute, the average claim for water damage or freezing is around $10,900.
Home Insurance Won’t Bail Out a Rogue Renovation Project
Don't go rogue when it comes to home renovations. Depending on the size and scope of the renovation, you may require building permits from your municipality. If you fail to obtain the necessary permits or meet building codes, a building inspector may shut down your renovation or order that it be demolished and rebuilt. The cost of a rebuild is not covered by home insurance.
A standard home insurance policy does not cover problems arising from "ordinance or law," such as when a building inspector orders you to halt or restart a renovation. That means you can't file a claim for demolition, new materials, or extra labor.
Bottom line: if you're going to renovate, make sure you get all of the necessary permits. It's also a good idea to check with your home insurance agent to see if you need to modify your policy to cover renovations. If the value of your home or personal belongings rises as a result of the project, you may need to increase your coverage levels.
Home Insurance Won’t Clean Up a Home-Sharing Mess
Make sure you understand your insurance options if you use a service like Airbnb or HomeAway to rent out your home for extra money. Home-sharing is considered "business use" of your home, and your homeowners insurance policy will not cover the cost if something goes wrong while you're renting out your space.
For example, if a home-sharing guest sustains an injury on your property, your home insurance liability insurance will not cover medical bills. Similarly, if a guest throws a wild party that causes property damage, don't expect home insurance to cover the bill.
If you plan to rent out your home, look into a home-sharing insurance policy to ensure there are no significant coverage gaps. A good home-sharing policy will include liability coverage, which pays for other people's injuries and property damage. A better home-sharing insurance policy, on the other hand, includes additional coverage types, such as coverage for your personal belongings or infestation coverage for bed bugs.
Other Things Home Insurance Won’t Cover
Here are a few examples of more common exclusions in a standard home insurance policy:
- Intentional loss. Intentional acts are not covered by home insurance. For example, if you set fire to your shed on purpose, your home insurance will not cover the damage.
- Power failure. A standard home insurance policy will not cover problems caused by power outages or other utility services that occur off your property, such as if your electric company temporarily turns off power for routine maintenance. However, your policy may cover food spoilage caused by a power outage caused by a covered problem, such as a fallen tree that knocks out a power line.
- Wear and tear. Home insurance covers unexpected and unforeseeable problems, such as water damage caused by a tree falling on your roof during a thunderstorm. However, it will not cover issues caused by deterioration and normal wear and tear, such as water leaks caused by worn shingles.