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.
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.
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.
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.”
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.”
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.”
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.
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.
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.
The Bottom Line
This is a partial list. Read your policy, especially the fine print, and ask questions. Most add-on endorsements won’t give you sticker shock, so consider covering those high value items. Work with an agent or someone who can help you navigate your policy. For more, see How Much Homeowners Insurance Should You Carry? and Find the Best Homeowners’ Insurance.