Your homeowners insurance policy does not protect you against every disaster imaginable. While it might seem that way when you read your declaration page, all standard homeowners policies have exclusions, sublimits, and conditions that can leave you with giant holes in coverage when you suffer a loss.
Every homeowner should know about these coverage gaps if you want your insurance policy to truly protect your home and your assets. We’ve seen clients at Bowthorpe & Associates Insurance Producers for years think their policy covers everything “only to find out it doesn’t” when it comes time to file a claim.
Standard homeowners insurance does NOT cover:
Water Damage, Flood Damage and Sewer Backup
Water damage claims are among the most common homeowners insurance claims, but your policy probably won’t cover every type of water damage.
Coverage for sudden plumbing system failures like broken pipes and accidental water discharges is standard. Your homeowners policy won’t cover flooding caused by surface water (heavy rain), rising bodies of water, or storm surge though. Flood insurance is required to cover those perils.
Note that flood insurance may come with waiting periods before your policy takes effect.
If you have a sewer or sump pump backup in your home, your standard homeowners policy won’t cover damages unless you purchase additional coverage. Since cleanup and restoration from sewage is often over $20,000, we recommend considering this endorsement for homes with basements or older plumbing.
Water damage that occurs over a period of time is also typically excluded from coverage. Plumbing leaks that take weeks or months to become noticeable, or roof leaks caused by worn shingles, may be seen as maintenance issues by your insurance company.
Mold, Dry Rot and Pest Infestations
If toxic mold or fungus appeared overnight due to a covered peril like a burst pipe, your policy would likely pay to clean it up. However, if excessive moisture was caused by long-term leaking or lack of maintenance, your claim would most likely be denied.
Even if your mold claim is covered, there will likely be a mold-specific sublimit in your policy. These sublimits typically range from $1,000 to $10,000.
Pests and pest damage are not covered either. Termites, rodents, beetles, and other wood-destroying pests can consume the structural integrity of your home and max out those mold sublimits without your homeowners insurance lifting a finger to help.
Again, since mold remediation and structural repairs can become very expensive. The best defense against mold and pests is regular maintenance, proper ventilation, and pest inspections.
Limits on Personal Property
Homeowners policies will cover the possessions in your home, but they may not cover as much as you think.
Personal property coverage is typically 50-70% of the dwelling coverage on your policy. While that number may sound high, there are often category limits within your policy that limit how much the insurance company will pay for certain types of valuables.
Jewelry, watches, firearms, sports collectibles, and works of fine art are commonly limited to $1,500-$2,500 per item. If you own a wedding ring worth $10,000, you may only collect $1,500 if it’s stolen. That’s only 15% of what you paid for it!
Scheduling your valuables on your homeowners policy gets rid of these limits and ensures they are covered for their FULL value. Scheduled personal property coverage may even provide broader protection for accidental damage or mysterious disappearance.
Coverages for Property Off-Premises and Home-Based Business Items
Homeowners policies also limit how much coverage you’ll receive for items away from your primary residence. Say you stored valuables in a storage unit or your property was stolen from your car or hotel room. You’ll likely be covered, but your insurance company will only pay up to a percentage of your personal property coverage limit.
If you own a home business or even run freelance-based work from your home, you may have another large gap in coverage. Homeowners policies typically limit business equipment to $2,000 or $3,000 and may exclude business-related liability completely.
Business owners will usually need to purchase a business policy or business endorsement to their homeowners policy to adequately protect themselves.
Home Maintenance Issues and Building Codes
No, your homeowners insurance policy will not pay to fix your home just because it needs maintenance or has fallen apart from age.
Asphalt shingles that crack over time, foundation settling from poor drainage, and old worn-out plumbing are common examples of maintenance issues that are denied by insurance companies.
As your home ages, you may find that local building codes have changed and your home no longer complies. When you need to rebuild your home after a loss, your insurance company will likely require you to make upgrades to meet current codes.
Your old roof would need to be replaced even if it wasn’t damaged by the covered loss. Ordinance and law coverage can help pay for demolition, reconstruction, and permit fees.
Liability Coverage Limits
Standard homeowners policies include personal liability coverage, but they won’t protect you if someone is seriously injured in your home and the medical bills exceed your policy limits.
Most policies only include $100,000 or $300,000 of liability coverage. However, hospital stays can cost much more than that. Liability can also cover lost wages and legal fees if the injured party decides to sue you.
For homeowners with assets they want to protect, larger liability limits or an umbrella policy can provide peace of mind. Umbrella policies extend liability coverage beyond your home and auto policies. Umbrella policies typically increase liability coverage in $1 million increments.
Your future income, savings, and investments could be on the line when someone is seriously injured in your home. Make sure you have enough liability coverage to protect yourself.
Coverage Additions You Should Consider
There are many ways to add coverage and close common gaps in homeowners insurance policies. Here are some of the most common recommendations we provide to our clients.
Download Our Free Homeowners Coverage Review Guide
- Flood insurance for homes in flood zones or prone to sewer backups
- Sewer backup and sump pump overflow coverage
- Scheduled (stated) personal property coverage for valuables
- Ordinance and law coverage for building code upgrades
- Identity theft expense coverage
- Extended replacement cost coverage to help pay for increased rebuilding costs
Like the Coverage Options Above? Learn More…
Your homeowners insurance needs will change as your home gets older, you acquire more belongings, and your lifestyle changes. Building additions, purchasing expensive jewelry, and even increases in building costs can create coverage gaps.
Review your homeowners policy once a year to help ensure you have enough coverage to rebuild your home as it is today and that your personal property limits are high enough to cover your belongings. A home inventory and knowing what your items are worth can also help expedite the claims process should a covered loss occur.
You wouldn’t buy a car or house without shopping around and making sure you’re covered. Do the same for your homeowners insurance since it protects one of your biggest financial assets.
Bowthorpe & Associates Insurance Producers has been serving Hampton Roads families since 1994.
Frequently Asked Questions
Q1: What doesn’t homeowners insurance cover?
A: Standard homeowners insurance policies do not cover flood damage, earthquake damage, sewer backups, poor maintenance issues, or intentional damage. To find out more about specific scenarios, you should review your denial of claim.
Q2: Does homeowners insurance cover flooding?
Standard homeowners policies do not cover flooding caused by surface water from heavy rain, rising bodies of water, or storm surge. To cover your home from flooding, you would need flood insurance.
Q3: Will my jewelry be covered?
A: Coverage for jewelry is usually limited unless you specifically list it on your homeowners insurance policy. See “Scheduled” personal property for more information.
Q4: Does homeowners insurance cover home businesses?
A: Most homeowners insurance policies limit coverage for business equipment to $2,000 – $3,000 and may exclude business-related liability. Business owners should consider a business policy or business endorsement.
Q5: When should I review my homeowners insurance coverage?
A: Review your homeowners insurance policy at least once a year to ensure you have enough coverage to rebuild your home and cover your personal property. Building renovations, new jewelry, and increases in construction costs can also cause gaps in coverage.