Homeowners Insurance what it Covers what it Excludes

A home is one of the largest and most meaningful investments a person can make. Most homeowners understand the importance of having a homeowners insurance policy to cover the costs of rebuilding a house and restoring possessions in the case of loss, but not all homeowners are familiar with the exact terms of their policy or of homeowner’s insurance policies in general. Since homeowners insurance is not frequently used and since most policies contain intricate, technical language, the average person may not be well-versed in their policy – and therefore may be in for an unpleasant surprise in the event of a catastrophe.

What exactly do standard homeowner’s insurance policies cover, and what do they exclude? What measures can you take to intelligently protect your home and your possessions in the case of a disaster?

What’s covered by a standard homeowner’s insurance policy:

Standard homeowners insurance policies protect your dwelling, other structures on your property (such as sheds, garages, etc.), and the contents of your household. Your policy will cover the cost of replacing or rebuilding these structures and items in the case of theft, damage or loss.

In addition, homeowners insurance policies provide for “loss of use”: They will cover the cost of living expenses such as hotel costs and restaurant bills if you cannot live in your home due to a covered claim.

Standard homeowners policies also include liability insurance in the event that someone is injured while on your property or by your pets and sues you for their injury. Finally, a standard homeowner’s insurance policy includes MedPay coverage, which will cover medical expenses incurred due to an accident or injury on your property in the absence of a lawsuit.

What types of damage or destruction are included in this coverage? Homeowners insurance policies vary along industry standards. The most basic policies cover losses incurred due to a list of “named perils” such as fire, lightning, storm, riots, theft, vandalism and volcanic eruptions. The common and perhaps most useful type of policy is termed an HO-3 policy and guarantees insurance against all perils but a few named exceptions. More specialized policies are appropriate for renters, condo owners, and people who own historic or older homes. For more information on standard coverage, click here.

What isn’t covered by homeowners insurance policies?

Damage caused by earthquake, flood, war, and nuclear disaster is almost always excluded. Insurance covering flood damage is not available through commercial homeowner’s insurance. Concerned homeowners must contact the federal government’s National Flood Insurance Program.

Other types of coverage are not included in standard policies, but can be added in riders to the policy at an additional cost. As mentioned above, damage to a beautifully crafted older home using vintage materials may not be covered by standard policies; specialized riders to your policy will provide money to rebuild without guaranteeing the quality or craftsmanship of the original structure. Specialized riders are also available to cover theft of jewelry or art, damage to a home office with technology of high value, or liability insurance within a home office setting.

Be alert to particular exceptions. With homeowners insurance, the coverage for replacing a structure doesn’t cover the cost of meeting new building codes, which may require out-of-pocket expenditures. Policies covering valuables lost to theft may not apply if the theft does not occur from the home. A particularly thorny policy eccentricity is the anti-concurrent causation clause. If a covered event occurs at the same time as a non-covered event, the policy may refuse coverage for damage due to the covered event.

To navigate the intricate world of insurance policies, educate yourself about what is commonly covered by standard policies and what requires a specific policy addition or rider. Ask your insurance agent for help deciphering a policy if needed. And in the event of making a claim, keep detailed records of the claim, including photos of damage and written copies of all communications with your insurance company.