Here’s What Homeowners Insurance Actually Covers
A home is more than a building you live in. It’s a place where you can feel safe and protected, which is why choosing the right homeowners insurance is a vitally important decision. Before doing so, it’s important to know what a standard plan does and doesn’t cover in case of disaster. Knowing which items are not covered will allow you to take preventive measures ahead of time to avoid damage and financial loss in case of destruction.
What is Homeowners Insurance and Do You Really Need It?
If you’re new to the homeowner landscape, you’re probably debating whether this type of insurance is even something you need.
Homeowners insurance is a guarantee that if sudden disaster strikes your property or its inhabitants, any costs that arise would be paid for by your insurance company.
It’s standard practice to have homeowners insurance; every year about 1 in 20 insured homes makes a claim, and the average claim amount is $12,474.
Here’s What Standard Homeowners Insurance Covers
Dwelling coverage is used to rebuild your home in case of minor impairments or destruction from natural disasters such as hurricanes and storms. It covers the frame and foundation of your home as well as attachments such as cabinets, furnace, and water heater. Some other common and covered hazards include:
- Fire and smoke damage
- Water damage from internal sources (but not external flooding)
- Damage to your Personal Belongings
Damage to your personal belongings
Content coverage reimburses you for items in your home that are damaged or stolen. This includes clothing, furniture, your computer, and any other personal belongings.
Liability insurance is a component of homeowners insurance that covers accidents or injuries on your property such as a slip and fall or damage done to a guest’s personal belongings. It also covers any accidental damage your property causes to others, such as a tree branch falling into your neighbor’s yard.
Additional Living Expenses
Additional living expenses are anything you pay to live somewhere else while your home is being repaired for damage. Let’s say your heating stops working and you decide to stay at a hotel until it’s back on--your homeowners insurance would cover your hotel costs. This type of coverage also applies to external structures outside your dwelling, such as garages and tool sheds. Generally, coverage for additional living expenses is capped at 20% of your maximum dwelling coverage.
What Homeowners Insurance Doesn’t Cover
Anything that could be prevented through proper care and maintenance isn’t covered. For instance, mold can be prevented through proper ventilation and pipe insulation. Obtaining coverage in those instances can be tricky, and requires diligent documentation of how the incident occurred.
There are also other perils that are left out of most insurance plans, either because they’re uncommon or are too location-specific for a general insurance plan to cover. Let’s go over what isn’t covered by standard homeowners insurance and what you may need a separate policy for.
Damage from Neglect
Improper maintenance of structures in and around your home generally won’t be covered. The most common issues that can arise as a result of these are termites, mold, and sewer backups.
Floods and Earth Movement
Events like floods, earthquakes, and landslides are too location-specific for general homeowners insurance to cover. If you live in an area where these events are common, you might want to consider buying a policy for these individual items.
Items with Sentimental Value
Old family photographs or heirloom items that were used by your great-grandmother may have little replacement value for legal and insurance purposes, while the emotional value they have is priceless. Damage to these items can be one of the most upsetting parts of any incident, but it is completely preventable.
Rather than storing your valuables under your bed or in a cabinet where water can easily reach your possessions, choose a storage solution that protects your heirlooms from damage such as a safe. Safes limit movement and protect the fragility of the items while serving as an additional protectant against fire damage and theft.
Property of Roomers, Boarders, and Other Residents Not Related to the Insured Party
Do you rent out a room to someone else to help pay your mortgage? Property of roomers, boarders, and other residents not related to the insured party are not covered by a standard homeowner insurance policy. If they don’t have renter’s insurance, you’ll end up with a very unhappy roommate if their computer, clothing, and other personal items are ruined by your pipes bursting or other unprecedented issues.
To avoid this situation, make it a point to verbally inform your roommate or boarder that their property is not protected under your insurance policy. Or, better yet, make it a requirement for them to get renter’s insurance as it is relatively affordable (usually around $10 per month) and allows residents to receive compensation if their items are damaged. At the end of the day, it’s a small price to pay for peace of mind and security of their belongings.
Do you have pets at home? If Fido is impacted by a pipe bursting, your homeowners insurance will not pay any of the health bills or other related expenses. This exclusion can be especially painful, as pets can be considered members of the family.
In hopes of a solution, you may consider investing in pet insurance; however, you’re likely to pay more in insurance than you’ll get back and you’ll have little control over treatment options. A more feasible solution is Flo by Moen's Smart Water Security System. With our proprietary system put in place, you can detect plumbing issues as soon as they occur, saving you hundreds of dollars and keeping Fido out of harm’s way.
Collectables, Furs, Jewels, Etc.
Standard homeowners insurance policies have special limits on a variety of items that are often worth much more than these limits. While you may be able to get special coverage on some items, the coverage is often expensive and specific to an individual item. Thus, you may find that in the case of fire or water damage, some of your most valuable items are not adequately covered. Consider a storage solution to minimize your chances of damage to these items.
Your Time and Sanity
Rebuilding after damage, even when it is covered, can be incredibly time-consuming. The many hours you’ll spend on the phone with the insurance company, documenting damage, meeting with contractors, etc., can leave you mentally and physically exhausted. Sadly, homeowners insurance offers absolutely zero coverage for this loss of time and sanity.
For this reason, prevention is crucial. Routine inspections, leak detection systems, and promptly attending to any issues are simple, yet critical measures you can take to eliminate the chance of damage and spending hours of your time to organize repairs.
How Much Homeowners Insurance Do You Need?
The extent of homeowners insurance you need depends on several factors, and your insurance company will be able to provide an estimate to help you choose the best coverage level. Here are the main factors that companies look at:
The size and structure of your home are the largest determining factors of the amount of dwelling coverage you’ll need. It’s best to have some wiggle room on this plan because although it’s unlikely, disasters are unpredictable and their results can be devastating.
Taking inventory of your possessions is a great way to determine the level of content coverage you’ll need. Be sure to take into account the cost of buying new items, not just the depreciated value of your current items. Alternatively, some companies may default to a percentage of the dwelling coverage.
Because filing a claim for liability is not as common as physical damage, it may be difficult to choose the right coverage level. However, a few determining factors include:
- Number of residents
- How often gatherings are held at your house
- If you are running a business in your home
- If you have pets
Further discuss liability options with your insurance company to ensure you’re getting a deal you feel safe and comfortable with.
Homeowners Insurance Claim Tips
If you’ve been affected by property damage or loss, you can receive compensation for most personal belongings and destruction to your home as long as you follow these tips.
Familiarize yourself with your policy.
Before filing a claim, it’s important to note that there are a few types of damage a standard insurance plan won't cover at all. Examples include ground seepage, sewer backups, and leaks due to poorly maintained pipes. The general rule is if it’s not the result of an accident or sudden, unexpected occurrence, your insurance probably won’t cover it.
This is why conducting routine inspections and receiving necessary maintenance on your home is crucial. If you neglect to do so, you could ultimately face thousands of dollars in repairs, none of which will be compensated.
Notify your insurance company immediately.
It’s best to collect evidence of damage when events are fresh and up to date. Additionally, a delay in notification indicates a lack of severity, and your insurance agent may not take the claim as seriously.
Most insurance companies are available to take calls 24/7, so if an emergency arises in the middle of the night, don’t wait until the next morning to give them a call or leave a voicemail at the least.
Thoroughly document the situation.
Filing a claim requires detailed information about the timeline of events starting as soon as the damage occurred. Your policy may require specific information regarding the value, quantity, and costs of the items lost as well as a detailed list of calls and meetings with your insurance provider regarding the losses. If you create a written report, be sure to supplement your evidence with pictures and videos.
Retain damaged property.
If an item has been destroyed beyond repair, it may be tempting to throw it away to begin clearing out your home in preparation for restoration. However, it is best to keep the item until an adjuster has inspected it.
This way, you’ll have proof of loss and a fair estimate on it’s value. Be sure to follow up with your adjuster regularly and ask for a progress report if they are taking an especially long time evaluating your items.
If the above fails and you still feel that you’re not receiving fair compensation for your losses, you can seek help from a property insurance attorney. These attorneys are skilled in negotiation and will assist you in filing your claim and receiving maximum compensation.
Preparedness is Key
Standard homeowners insurance will not help you recover from any of these losses if the culprit is water damage, the most common catastrophe homeowners face. In fact, water damage and mold cost the insurance industry a staggering $2.5 billion dollars per year, and the average cost of a home water damage insurance claim is $6,965. In order to prevent financial and material loss, it’s essential to take preventive measures against water damage and choose an insurance plan that is suitable for your needs.
Prevention is Possible
Failure to take appropriate action after an incident will make it difficult for your insurance company to reimburse you properly. However, no insurance policy is all-inclusive. Being aware of what you will not receive compensation for is key to preparedness in case of disaster. In the meantime, continue to perform annual inspections on your home and consider smart home technology that keeps you and your family safe and can help save money when it comes to your homeowner's insurance.