Claims That Homeowners Insurance May Not Cover
I paid my homeowners insurance premium, so I’m covered right? Not necessarily, though this is a common belief. Limits, exclusions, and homeowner maintenance cause homeowners problems at claim time, on what is thought to be a “covered loss” by the insured. Following is a list of items that should be reviewed on the policy and discussed with your agent.
- Loss assessment- If you live in a condominium or townhouse, or belong to a HOA and there is community property such as a pool, playground, or clubhouse? You probably have loss assessment coverage on your policy. The communal property and liability with that property is covered by the master policy of the HOA. However, any amount of a loss that exceeds the limits and any deductibles are often paid by the HOA individual members. Example: Someone gets hurt in the clubhouse and sues the HOA for three million dollars and the master policy liability limit is two million dollars. The excess one million dollars will be divided equally among each member.
- Earthquake- Coverage for earthquake is excluded from the standard homeowners’ insurance policy, and must be added to the policy by endorsement. If you are anywhere near a fault line, a talk with your agent is advised. In most areas the endorsement is inexpensive.
- Flood- insurance to protect against a flood is purchased as a completely separate policy from the federal government (NFIP). “My home is in a low risk flood zone, so I don’t need flood insurance.” Think again, flooding is often caused by heavy localized rain, snow melt, poor engineering, and ground saturation due to water run-off in developed areas.
- Drain and Sewer Backup- depending on where the sewer drain is in your house you can determine the amount of coverage, if any, you need. A drain that is located in the finished basement of a house may require more than a home with the drain in the garage. Assess the location and potential damage to drywall and contents in the area and discuss with your agent. Many policies have no coverage for this peril, with many more providing the minimum $5,000 of coverage. Many carriers will not allow this endorsement to be added or increased once a claim is filed, so determining the proper amount of coverage up front is paramount.
- Collectibles- Jewelry, instruments, stamps, antiques, and guns are normally covered with minimal amount of coverage, if any at all, on a standard homeowner’s policy. Often this coverage is limited on covered perils. A stand-alone policy can be purchased to cover these valued items for the amount they are worth and from all perils. Many homeowners have been disappointed to find out their most prized possessions had no coverage after a loss occurred.
- Personal property- Quick, close your eyes and mentally list every item in your living room. Probably forgot a few items? Now, do it for the whole house! A video recording of the contents in your entire house is invaluable when a total loss has occurred. Personal property is standard on a homeowner policy. However, remembering what you have and proving that you had it to begin with is another story. Finally, make sure your policy covers personal property at replacement cost not Actual Cash Value. You will not be happy if the insurance company reimburses you for your minus depreciation. Ask yourself, how much are my used clothes worth? What would I get for a three year old used refrigerator? If your policy is Actual Cash Value, you may find out the painful answer.
The bottom line is: talk to your agent! It could be the most valuable fifteen minutes of your life. Not everything is covered on a homeowner’s insurance policy, but almost everything can be with a little forethought and time. If you don’t pay the premium, you will own the loss!
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