Homeowners insurance is indemnification against both unexpected and anticipated home damages based on possibility and probability. Insurance professionals design and develop home insurance quotes to protect homeowners against loss from such events as fire, burglaries and hail. Unfortunately, there are three common exclusions that mandate every prudent homeowner to be cognizant and prepared in the event these circumstances should arise. These common nonnegotiable exclusions are: loss due to flooding, water damage, and mold; ordinance compliance regarding construction; and damage from earthquakes.
Flooding and Water Damage
Unless there is a rider placed on the policy in the form of an addendum, flooding is not covered in the homeowners insurance policy. Flooding, from any source, including an overflow of a body of water, such as a river, bay, gulf or tidal wave is excluded. Additionally, it is inclusive of damage caused by a sewage backup or sudden structural disintegration caused by water overflow from another source, for example, a hot water heater or air conditioning system. Furthermore, homeowners insurance will not cover the cost of damage caused by water seepage in the foundation.
Water damage caused by flooding from hurricanes is not indemnified in homeowners insurance coverage, specifically in coastal regions. Flooding caused by melting snow or frost is excluded as well. Mold emanating from flooding and standing water, wet carpets or wet structural elements are not damages that will be compensated. Homeowners must purchase separate flood insurance in order to be protected.
Home insurance companies don’t offer coverage for damages caused by flooding. If you live in an at-risk area you can get flood insurance from the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency (FEMA). Established in 1968, the NFIP offers financial protection to homeowners, renters, and business owners in communities that participate in the program. Homes in high-risk areas with mortgages from federally regulated lenders must have flood insurance. A high-risk area is defined as a region that has 1% or greater chance of flooding in any year, which is equivalent to a 26% chance of flooding during a 30-year mortgage. The annual cost of flood insurance for a moderate-to-low risk home starts at $129, according to the NFIP’s website.
Homeowners insurance policies don’t provide coverage or benefits for damage related to earthquakes. Similarly, it will not reimburse the homeowner for damage from landslides, mudslides, avalanches, sinkholes or volcanoes. It may be easy to think that if you don’t live in a common earthquake state, such as California, that you don’t need earthquake insurance. However, earthquakes pose a risk to millions of Americans living in 39 states. In fact, more than 5,000 earthquakes of 4.0 magnitude or greater were recorded across the country from 2002 to 2012, according to the U.S. Geological Survey. These tremors have caused millions of dollars in property damage, which is a good reason to consider purchasing earthquake insurance if you live in an at-risk area.
Home insurance companies offer earthquake insurance as an added endorsement to an existing policy. The extent of coverage includes personal property and loss of use coverage, but these can be more restrictive than a standard insurance policy. For example, loss of use coverage, which applies if your home is uninhabitable and pays for hotel stays and other living expenses, may have a limit of only $1,500 in an earthquake policy. Make sure to check with your insurance agent to see what your earthquake risk is and how much coverage will cost you.
Ordinance Compliance Regarding Construction
If the homeowner is found to be in violation of a municipal ordinance and must have construction work done to render the property in compliance with the city code, homeowners insurance will not compensate the owner for these construction costs. When presenting home insurance quotes, over-zealous insurance agents often do not clearly explain that the policy does not cover ordinance compliance expenses or provide indemnification against faulty or flawed construction. For example, if a contractor agrees to build an addition, and the work is not completed, or is unsatisfactory, the homeowner must pay any costs pertaining to the construction including poor performance modifications. In like manner, the policy will not pay for insect or vermin infestations as these problems are considered a part of regular property maintenance.
Homeowners insurance is protection against anticipated losses, but the policyholder must use good judgment in reviewing the policy data page for exclusions that will prevent unexpected surprises when an emergency arises.
Other Notable Exclusions in a Basic Home Insurance Policy
- Falling objects.
- Weight of ice, snow, or sleet.
- Freezing of plumbing, heating, air condition, or automatic fire-protective sprinkler system.
- Landslide or mudslide.
- Nuclear accident.