Homeowners Insurance Policy Exclusions

The vast majority of home, condominium and renters policies we suggest to clients use the valuation method known as replacement cost.  This means there is no deduction taken for depreciation, so you’ll get your property repaired or replaced, with new materials.  What causes your claim, and determines whether or not the claim is “covered” and your insurance company will pay, is known as a peril.  We always recommend, and if you’re our client, probably have “special perils” because this means that anything that happens to your property is covered, unless the cause of the claim is specifically excluded.  Many insurance agents will quote “special perils” for your house, but “named perils” (only the specific perils mentioned in the policy will trigger a covered claim) for your personal property, because it saves money.

There are three perils, automatically excluded in the homeowner policy, that you have the opportunity to “buy back”.  In other words, for additional premium, you can gain coverage, so that if your property is damaged, you’ll get it fixed with insurance dollars, instead of your own.  The first peril that is automatically excluded is known as “sewer and drain backup”.  If water or sewage backs up through a drain and damages your property, you are not covered for the damaged caused, unless you have purchased this coverage.  Most insurance companies have an endorsement that provides $5000 to $10,000 of coverage, with the option to purchase more.  A common claim we see is due to a sump pump failing, usually because it can’t keep up with the volume of water, or lightning strikes it, rendering it useless.  In addition to having a mess to clean up, your personal property can be ruined.  Depending on how long the carpeting is exposed, it may need replaced.  Drywall, furniture and furnishings also may be destroyed.  Make sure you have this coverage if you’re concerned about this exposure.  Many people buy a battery powered back up so that if the sump pump fails, there is another source to pump the water out.  It’s a good idea to test your sump pump periodically to make sure it’s in good working order.  This coverage is becoming quite expensive as insurers have lost money on this line of insurance the last several years.  Another peril, automatically excluded, is earthquake, or damage caused by “earth movement”.  Ohioans have felt minor earthquakes recently.  Brick homes are more expensive to insure than frame homes because frame homes are more flexible, and less likely to sustain damage.

The final peril that is excluded in all homeowner policies is flood.  With the average flood claim being over $45,000, it’s important to understand that this is not a covered peril.  You can have a flooded area caused by a pipe bursting, or washing machine overflowing and, while the damage is probably covered under your policy, the damage caused is not due to a “flood”.  Flood damage is caused by rising water, including snowmelt.  If water comes through your basement window, or laps up against your house and gets in, that is considered flood damage.  Flood policies are all underwritten by the National flood Insurance Program (NFIP) and premiums vary, based on which flood zone your home lies in.   If you live in a high risk zone, and have a mortgage you’ll be required to carry flood insurance.  If you live in a low risk area and are eligible for the Preferred Risk Policy, your flood insurance premium may be as low as $129 annually.  Flood policies can be written for just the dwelling, or for your home and personal property.   Please note, that damage to your property caused by flood, earthquake, or a sewer or drain backing up, are not the only exclusions in your policies.  If you have any questions about your policy, or would like to discuss these coverages further, just give us a call.