Homeowner’s insurance is so confusing that we don’t even
know what to call it. Is it homeowners, homeowner or home insurance? Whatever
your preference, before you sign up for a policy that protects what is probably
your most valuable asset, understand what’s covered, how much coverage you have
and what’s not covered. Here is a list of things you should consider.
1. Wind
Statistically, the element you should be most concerned
about isn’t fire – it’s wind. That’s because windstorms top the list of things
that cause home damage. Wind could come from a tornado, hurricane or just a
fluke storm that nobody expected. Your policy may have a windstorm or hurricane
deductible that is separate from your regular policy. You may, for example,
have a $1,000 deductible on your homeowner's policy, but the windstorm or
hurricane deductible is a percentage of the total value of your home. If you
have a $300,000 home and a 3% deductible, you’re on the hook for the first
$9,000 of damage. Nineteen states on the Gulf or Atlantic coasts, plus the
District of Columbia, have hurricane deductibles.
2. Firearms
If you keep guns in the house, your policy may only cover a
portion of their value. “Without an endorsement [also known as a rider], you
may only have $5,000 worth of coverage,” says Jason Owens, an agent at Cole
Thornton in Kansas. You can also look at separate policies outside of your
homeowner’s policy. The National Rifle Association has coverage for its
members, which provides protection against theft, damage, fire and loss.
3.
Sewer/Sump Pump Backup
What happens if your sump pump breaks or your sewer backs
up? According to Owens, you might only have $10,000 in coverage – if you have
it at all; sewer problems are typically not included in standard policies – but
the damage could be much larger. Again, you might be able to get an extra sewer
and drain endorsement on your policy for extra coverage.
4. Cash
Don’t trust the banks to hold your money? Owens says that
you shouldn’t count on your homeowner’s policy to cover much of it. “If it is
more than $500, it probably isn’t covered.”
5.
Earthquakes
You won’t ever have to worry about earthquakes, right? There
are about 20,000 earthquakes per year, or roughly 50 to 55 per day, according
to the U.S. Geological Survey. “Earthquake [insurance] is not a standard
coverage. A separate policy is needed,” says Paul Dzielinski, a veteran of the
insurance industry with more than 30 years of experience. “Unless the homeowner
lives in a high earthquake zone, like California, the premium is usually very
affordable.”
6. War and
Terrorism
With the increased focus on worldwide terrorism, experts
warn that it’s only a matter of time before another event strikes the United
States. Whether your home is covered or not is complicated. It might depend on
the type of attack. A chemical attack or one using radioactive weapons probably
isn’t covered, but one causing fire or smoke damage probably is. But it gets
even more complicated. Dzielinski says, “Insurance companies cannot exclude
damage due to acts of terrorism. But if the United States declares war, and
your home is damaged due to a war action, you are not covered.”
7. Sinkholes
If you live in an area where sinkholes are more common,
there’s a good chance that your homeowner’s policy doesn’t cover you. Good
news, if you live in Florida: Insurers have to provide the coverage. But in
states like Texas, Missouri, Kentucky, Alabama and Pennsylvania, where
sinkholes are also an issue, you should consider extra coverage.
8.
Home-Based Business
Regardless of the size of the business, if you’re routinely
using your home to operate a business, your homeowner’s insurance probably
doesn’t cover accidents or injuries connected to it. “Many people run a
business out of their home,” says Dzielinski. “Most of the exposures from a
business, such as worker’s compensation and professional liability, are
excluded. However, the occasional use of a part of your home for business
purposes is usually OK.”
9. Jewelry
Your high-priced necklaces, earrings and other precious
jewels may only be partially covered. You’ll need an appraisal before you get
an extra endorsement on your policy, but most insurance companies will add that
coverage. The same goes with high value collectibles.
10. Termites
If you fall victim to termites, don’t expect your
homeowner’s insurance to help because termite damage is normally not covered.
The best thing you can do is work with a pest control company and keep your
termite protection active and up to date. If you catch the problem early, repairs
can be minimal.
11. Flooding
Floods are never covered in a homeowner’s policy, according
to Dzielinski, which means a homeowner needs to buy a separate flood policy.
However, flood insurance from the National Flood Insurance Program is only
available if the community the homeowner lives in participates in the NFIP.
It’s hard to find private flood insurance at an affordable price, but if you’re
not in an area prone to flooding, you’re likely OK. Ask a local agent for
guidance.