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Homeowners insurance protects your home and personal belongings from a wide range of possible risks, like fire damage, vandalism, and theft. However, standard home insurance policies don’t cover all potential losses, leaving your property vulnerable.[1]

Home insurance coverage varies by the specific insurer and policy. Understanding what your home insurance does and doesn’t cover is crucial to making informed decisions about your coverage and safeguarding your most valuable assets.

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8 areas that most home insurance companies don’t protect 

Standard homeowners insurance typically excludes various types of damages, including earthquakes, flooding, sewer backup, and more. However, most insurance companies offer supplemental coverage, often known as insurance riders, to fill any gaps in coverage.

Earthquakes and earth movement

Most home insurance policies exclude coverage for earthquakes and other forms of earth movement. But you can usually purchase additional coverage for these events through an earthquake or earth movement insurance rider.

Earthquake insurance covers damage from seismic events, while earth movement insurance covers damage from a broader range of earth movements, such as landslides.

Flooding

Standard homeowners insurance policies don’t cover flood damage. For example, if a storm floods your basement and seeps through to your foundation, insurance won’t cover the damages. And flood damage costs can add up quickly — the average claim payout for water damage is $11,650, according to the Insurance Information Institute.[2]

Separate flood insurance policies may be available through your insurance company or the National Flood Insurance Program (NFIP).

Home business

Standard home insurance may provide limited protection for a home-based business, but you’ll likely want to purchase home business insurance. For example, if your homeowners policy covers business equipment in the home up to $2,500, and a house fire destroys $10,000 worth of inventory, your home insurance will only pay $2,500, minus the deductible.

Neglect

Standard homeowners insurance policies exclude damage that results from neglect. Neglect happens when the failure to take reasonable care of one’s property results in damage or loss. Homeowners are responsible for maintaining their homes and preventing damages, such as repairing leaky roofs and promptly addressing signs of water damage.

Sewer backup

Most home insurance companies exclude damage from sewer backup, as it’s considered preventable through proper maintenance. Insurers typically exclude sewer backup issues to keep premiums affordable and encourage homeowners to take preventative measures, such as regular sewer line maintenance and the installation of sump pumps.

Wear and tear

Insurance policies protect against unexpected and sudden damage, not issues caused by gradual wear and tear. Insurers expect homeowners to perform routine maintenance and upkeep to prevent wear and tear from escalating into more serious issues. For example, if you fail to address a leak in your ceiling, and it causes water damage to your floor, your insurance wouldn’t cover the damage.

Termite damage

Insurance companies consider termite damage avoidable through routine maintenance, such as regular inspections and termite treatment. It’s not considered sudden and accidental damage and so is typically excluded from standard homeowners coverage.

Valuable artwork and jewelry

Your homeowners policy may include coverage for artwork, jewelry, and other valuables up to the coverage limits. But if you want to protect your high-value items thoroughly, review your policy limits and consider purchasing additional coverage to ensure you can replace them if they’re stolen or damaged.

Learn More: What Does Home Insurance Cover and What Does It Exclude?

What is covered under a standard home insurance policy?

From structural damage to personal property loss, standard homeowners insurance policies help protect your property from unforeseen damages. Understanding what standard home insurance covers is important to ensure adequate coverage. 

Home insurance policies typically cover the following:

  • Dwelling coverage: This covers the physical structure of your home from damage caused by covered perils, including damage to the roof, walls, floors, and foundation.

  • Liability coverage: This helps protect you from lawsuits for injury or property damage you cause to others.

  • Loss of use coverage: This covers the costs of temporary housing, meals, and transportation, if you have to leave your home due to damage from a covered peril.

  • Other structures coverage: This offers protection for structures on your property that are not attached to the primary dwelling, such as a detached garage, shed, or fence.

  • Personal property coverage: This covers the contents of your home, such as furniture, clothing, electronics and other household items. You may need additional coverage to protect high-value items, such as jewelry and artwork.

Read More: Types of Homeowners Insurance: Which One Do You Need?

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How to get additional home insurance coverage

Homeowners who need coverage beyond their standard homeowners insurance have several options, including:

Riders

Insurance riders, or endorsements, are add-ons to an existing homeowners insurance policy that broaden your coverage. For example, you might purchase a rider for expensive jewelry, artwork, or other valuable items that may exceed your baseline personal property coverage limits.

Umbrella insurance

An umbrella insurance policy extends your liability coverage beyond the standard homeowners insurance limits. Umbrella insurance is particularly beneficial for homeowners with significant assets that may be vulnerable to potential lawsuits. It’s important to compare the value of your home and personal belongings with your policy limits to ensure adequate coverage.

Actual cash value vs. replacement cost

Actual cash value (ACV) and replacement cost are the two main methods insurance companies use to calculate the value of your property when paying a claim. Understanding the difference between these two types of coverage is crucial, as it will affect the compensation you receive for a covered loss.

ACV coverage refers to the cost to replace your belongings, factoring in depreciation due to things like age and wear and tear. Replacement cost, on the other hand, pays to replace your property with new items of similar kind and quality without deducting for depreciation.[3]

For example, if you have ACV coverage and a 5-year-old computer was stolen from your home, your insurance company would pay you the value of a 5-year-old computer, not the cost of a brand-new one. If you have replacement cost coverage, though, your insurance company would pay you the value of a brand-new computer.

Learn More: Actual Case Value vs.Replacement Cost: Which Is Best?

Homeowners insurance coverage FAQs

Homeowners insurance helps protect you from unexpected financial losses, but understanding what your policy covers can be challenging. To help, here are answers to some commonly asked questions about homeowners insurance coverage.

  • Does home insurance cover water damage?

    It’s possible. Homeowners insurance may cover water damage, depending on the cause of the damage. For example, your insurance may cover sudden and accidental water damage, such as damage from a burst pipe. However, standard homeowners policies typically exclude flood damage and water damage caused by a lack of maintenance.

  • Does home insurance cover mold damage?

    It depends. Homeowners insurance should provide coverage if the mold results from a covered peril, such as water damage from a burst pipe. On the other hand, if mold results from long-term neglect or poor maintenance, insurance likely won’t cover it. For example, if the mold growth is due to a leak the homeowner knew about but didn’t address, insurance probably won’t cover the losses.

  • Does home insurance cover trampolines?

    It’s possible but not necessarily likely. Many providers exclude trampolines from homeowners insurance because of the potential liability. However, some insurers will cover the risk if you take certain safety precautions, such as installing netting around the trampoline to prevent falls.

  • What is a homeowners insurance deductible?

    A homeowners insurance deductible is the amount of money you must pay out of pocket on a claim before your policy starts paying for the loss.[4] For example, if your deductible is $1,000, and the damage from the covered loss is $10,000, your insurance will pay $9,000. Deductibles vary by the insurance company and the coverage options you choose.

  • Will your homeowners insurance go up if you file a claim?

    It’s common to see your home insurance premiums increase after filing a claim. However, it depends on the type and number of claims on your record. Homeowners insurance claims can stay on your Comprehensive Loss Underwriting Exchange (CLUE) report for up to seven years.[5] 

Sources

  1. Insurance Information Institute. "Homeowners Insurance Basics." Accessed April 19, 2023
  2. Insurance Information Institute. "Facts + Statistics: Homeowners and renters insurance." Accessed April 19, 2023
  3. Insurance Information Institute. "Insurance for Your House and Personal Possessions." Accessed April 19, 2023
  4. National Association of Insurance Commissioners. "A Consumer's Guide to Home Insurance." Accessed April 19, 2023
  5. Consumer Financial Protection Bureau. "LexisNexis C.L.U.E. (Auto & Property Reports)." Accessed April 19, 2023
Theresa Stevens
Theresa Stevens

Theresa Stevens is a personal finance writer based in Boston, Massachusetts. Her work has been featured in Forbes Advisor, Bankrate, and more. As a former financial advisor, she has first-hand experience helping people solve their money challenges. When she's not writing, you'll find her trying out new karaoke spots or planning her next trip abroad.