Homeowners insurance policies can be difficult to read, but the information is crucial to your financial well-being, especially when tragedy strikes and you’re forced to make a claim.
Note: The coverages described here will vary from state to state and company to company, so be sure to research your policy diligently.
What is covered. First and foremost, the structure of your home, plus any related buildings such as detached garages and storage sheds, are covered from damage through sudden disastrous events such as fire and windstorm. The fundamental reason you have coverage is to protect your dwelling. You will have a deductible, meaning the portion of a loss that you are expected to pay. That amount may go up if you live in higher-risk areas, such as hurricane-prone coastal regions or the earthquake-prone West Coast.
The coverage protects your contents up to the amount you declare. The insurance will cover most of your personal items, however it may set some limits. Along with your policy, you should receive a document with a schedule of items for which coverage limits apply, such as maximums payable for the loss of jewelry, furs, art, firearms and other possessions. Personal items stolen from your car are often covered by your homeowners policy.
What is not covered. Limits to coverage are not necessarily determined by what objects are excluded, but by circumstances. This is most notable with water damage. Water damage caused by a sudden event, such as a frozen pipe bursting or a windstorm ripping the roof off and rain pouring in will most likely be covered. However, water damage that happens slowly over time due to a slowly dripping pipe in a wall or an undetected leak in the roof are considered to be the responsibility of the owner and likely will not be covered.
This raises the issue of mold. In many states and with different insurers, the presence of “black mold” may not be covered depending on what led to its presence. As with water damage, if the mold is the result of a sudden accident such as a bursting pipe or storm damage, it most likely will be covered. If it happens because of a slow leak, most likely it will not. You should review the language of your policy on this closely and discuss it with your agent.
Floods are not covered by a standard homeowners insurance policy, nor are earthquakes. Special policies must be purchased to be covered for these natural disasters. Flood insurance is sold through private insurers but is overseen by the National Flood Insurance Program by the U.S. government.
Liability coverage. A separate provision of your homeowners insurance is the coverage that protects you if you are sued when someone is injured on your property. However, similar to the property damage portion of your policy, there are some things liability will not cover or will limit. If you own a trampoline, insurance companies may exclude accidents involving its use or may not cover you at all. If you own a pool you will be required to have certain safety measures in place, such as a fence with a self-locking gate and the latch at least four feet off the ground. If you have a dog on the list of known aggressive breeds, you may not be covered if it bites someone.
In all these cases, you must notify the insurance company. If disclosure isn’t made, a later claim will not be covered and the policy could be canceled.
An additional liability policy, known as an umbrella policy, can be purchased to cover losses that exceed the amounts set in the basic policy.