Am I Covered? Homeowners Policy FAQ

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Termites? Earthquakes? Mold? Water Damage Cleanup?

Not all insurance policies are written the same and it’s important to understand your home’s history, the risk associated with where you live and to choose a robust home owners insurance policy. For most families buying a home is the single largest financial investment they will ever make. This makes it critically important to have an understanding of the risk associated with different coverages and to wisely choose the right policy based on factors we will discuss in this article.  As the homeowner you are ultimately responsible for the policy you choose and the associated coverages.

First A Very Important Word To Know “Exclusion”

An Exclusions is a specific type of damage that your insurance policy will NOT cover.  As a home or business owner it’s important to know and understand these exclusions and the risk you are accepting.

“Named Peril”

A “Named peril” policy will give you a list of what will and will not be covered by your insurance policy. Should something happen you’ll need to prove that it is part of your named perils. If you are unable to prove that it is part of your Named Peril you will not be covered.  This could result in tens of thousands of dollars that you would be responsible for covering.  The benefit of a named peril policy is typically they are less expensive. So if you look purely at cost then a named peril policy will save you money so be mindful to understand your risk and your ability to pay out of pocket if you are not covered.

“Open Peril”

An “open peril” policy means that you are covered against all kinds of loss, except for the ones listed in your policy. With open perils coverage, it is up to your insurance company to show that the damage or loss was not caused by something that is covered. Basically an “open peril” policy is more robust, limits your risk as a property owner but is therefore more expensive than a similar “named peril” policy.

What Does My Homeowners Policy Not Cover?

Pests & Rodents 

Let’s start with everyone’s least favorite (or mine)…nasty critters!  Racoons, squirrels and other “critters” can create thousands of dollars of damage to your home or business property. Unfortunately this type of damage is normally NOT covered by your insurance policy,  If a racoon takes up resident in your property you will know…racoon urine is one of the worst odors to get out of a property,  This is why it’s NOT a good idea to put scrap food out for animals to eat.  You may think you are “helping them out” by throwing scraps in the woods near your property but all you will do is create a feeding ground for animals and they may decide to “move in” without you knowing.

Termites

If your house didn’t have a termite inspection when you purchased it or it’s a very old house, consider getting an inspection.  Several years ago I had an Uncle who never had his home properly treated for termites and they ate through a closet and several floor joists.  This ended up being a costly job to the tune of $12,000.  Not knowing your home or doing preventative maintenance can cost you much more money in the long run.

Floods & Water Damage Repair

Floods are a large source of water damage restoration claims for homeowners.  Over the years insurance companies have made it more difficult to be covered from flood or rain water cleanup insurance claims. If the rain or flood water came through a basement window that is considered a flood and normally you are NOT covered.  If the water was from a natural source such as ocean water, lake water, ground seepage then you again are NOT covered. However, if it has to do with your home’s equipment, like a hot water heater, burst pipe that froze during the winter, washer machine overflow or refrigerator leak, it would be covered.

Natural Disasters, Earthquakes, Mudslides, Landslides, Tornadoes

If your home or business is affected by an earthquake, landslide, mudslides these are normally NOT covered by your insurance policy.  This is where FEMA can step in and declare it a disaster area and the federal government would pay out some money to property owners who suffered devastation. You would have to wait for the federal government to declare it a disaster area and apply for relief on FEMA’s website.

Tornadoes

Under most homeowners insurance policies tornadoes are covered (but always read your policy to verify) and so is wind and hail damage.  Wind and hail damage are common claims from strong thunderstorms even when a tornado didn’t build up in your area.

Mold

FRAUD

If you do any intentional damage to your property and try to get it covered by your Insurance company this can be considered insurance fraud and you will NOT be covered, Additionally you can be charged with insurance fraud and be prosecuted including fines and jail time depending on the severity of the situation.

Additional Coverages (Know Your Risk!)

Water And Sump Pump Backup Rider

If you have a finished basement we HIGHLY recommend that you have a water and sump pump backup rider to your insurance coverage.  We suggest a minimum of $10,000 coverage but having more is a wise decision.  For a couple hundred dollars a year you can rest easy if you experience any water damage or sump pump failure or sewage backup.  Additionally if you have a bathroom in the basement of a lower level of a split level home we highly recommend a water and sump pump backup rider.  The typical water damage cleanup bill for just drying out a medium size finished basement is $2,500 to $5,000 dollars and can be more depending on the severity of the water damage.  The build back reconstruction cost for a medium size finished basement can easily be $10,000 to $20,000 dollars depending on the materials you choose.  If you live in a place that has a high water table, or is prone to flooding we strongly recommend a $25,000 water and sump pump backup rider policy to minimize your risk.

Earthquakes

If you live on or near a fault line we strongly recommend that you examine your policy and compare coverages.  Adding coverage for earthquakes can be a good decision depending on where you live.

Floods

Your insurance company will most likely NOT offer flood insurance.  Don’t give up your beach or lake home dream though!  Fortunately the National Flood Insurance Program offers an independent insurance policy that covers water damage from floods as an additional specialty coverage.  The water damage cleanup from a lake overflow or flood can cost tens of thousands of dollars.  It only takes one event and not being covered to ruin you financially.  If you live in a flood zone we highly recommend you purchase flood insurance to ensure against flood and water damage repair.

Conclusion

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