As a homeowner, you do your best to protect the value of your property and the smooth function of the household. This can be a complex proposition, so a good homeowner’s policy is a valuable ally. Knowing that your home is insured against potential but unpredictable problems and loss can bring great peace of mind.
A standard insurance policy does a lot for the homeowner. Most policies cover damages from fire, storms, and theft or vandalism. They likely cover the dwelling and other structures on the property, like fences and sheds. Standard policies also cover personal property like furniture and electronics, and they will pay for expenses that arise if you’re forced to vacate your home for repairs. Liability coverage is also standard, protecting you and your family from lawsuits related to injury occurring on your property.
It’s easy to imagine any of these situations occurring over the course of your life, and it’s good to know that they won’t crush the life out of you financially. But there are some misfortunes that standard insurance doesn’t cover, and we sometimes overlook that fact unless one of them strikes. Read on for a discussion of situations where standard home insurance policies don’t apply.
Floods are the most common natural disaster in the United States. From 2003 to 2012, total flood insurance claims averaged nearly $4 billion per year. What’s more, if you live in a high-risk area, there is at least a 1 in 4 chance of flooding during a 30-year mortgage.
“There is at least a 1 in 4 chance of flooding during a 30-year mortgage”
Many homeowners assume that their policy covers flood damage, but this is not usually the case. Protection from flooding is rarely available through private insurance. It can be obtained through the FEMA-run National Flood Insurance Program.
Another natural disaster that’s not covered by a standard policy. Protection from earthquake can be obtained through an additional policy, and most people don’t carry it unless they are in an area where earthquakes are common.
These are two situations with the potential to devastate a home, but most people are not insured against them. The decision to purchase additional coverage should be based on individual situation, property history, and location. Some other potential expenses related to property damage aren’t covered by standard policies, and these costs can add up.
The out of pocket cost for damages can be considerable, depending on the deductible set forth in a policy. Standard policies may require a flat rate deductible or a percentage, and these have been rising in recent years. Deductibles are now often 2 to 10% of the home’s insured value, which can be quite a sum in many circumstances. A higher deductible can make premiums low but homeowners have to watch that balance carefully.
In this case coverage is determined according to how the event occurred. If it’s shown to be because of negligence, then the cost to repair damages caused by burst pipes will often not be covered by insurance.
If two events happen at once, and one of them (like flooding) is not covered, it may be that the policy won’t cover either. So if in a single unfortunate event the roof is damaged by ice and the pipes burst, the homeowner might be left to cover repairs.
Most people assume that if their home is a total loss their insurance will pay to restore the property, but this is not the case. Most policies have cap on what they will pay, and it might not be enough to fully cover the cost of rebuilding after a fire or tornado.
In the case of major damage, it can be very time consuming to file the required paperwork and follow up on appeals. In many cases homeowners suffer lost wages in addition to their losses. Standard insurance will not reimburse for this loss.
Of course it’s impossible to predict which of these hazards might strike your property. You have to consider both cost and risk when choosing insurance. One way to reduce both is to do what you can to prevent damage. Little things like water leaks or electrical problems can develop into real problems if left unattended. Home monitoring products and smart systems are an economical way to keep an eye on these things and boost your peace of mind.