Home insurance is crucial in order to keep your home and family safe in the face of disaster or uncertainty. Unfortunately, basic home insurance policies don't cover everything.
What It Covers
A basic home insurance policy comes with the same four main coverages:
- Dwelling Coverage: This provides compensation for damages to the physical home and its attached structures due to fire, wind, hail, smoke, lightning or explosions.
- Personal Belongings Coverage: This provides compensation for items lost or damaged due to fire, smoke, lightning, theft or vandalism.
- Liability: This covers expenses related to bodily injury and property damage of another person that occurs on the insured property.
- Additional Living Expenses: Known as ALE, this covers the cost related to temporarily moving elsewhere while the home is being repaired or replaced after a disaster.
Common Exclusions and Limitations
Home insurance provides limited coverage for boats, jewelry, furs and art. For boats, home insurance generally only covers $1,000 for damages. You can purchase a separate boat insurance policy to compensate for this policy limit. There are also policy floaters available to cover expensive items such as jewelry, firearms, furs and art.
There is also a limit on how much liability insurance a home insurance policy offers. To handle extremely expensive damages, injuries and medical bills, you may want to add an umbrella liability insurance policy. Umbrella liability insurance covers any gaps left over by your other liability coverages. This can apply to your home's personal general liability insurance as well as liability coverage on your vehicle’s auto insurance policy.
Home insurance may not cover certain unattached structures, such as fences, decks and pools.
It also will not cover damage due to certain incidents such as water damage and earthquakes. Earthquake damage is not covered under home insurance and should be covered under a separate earthquake insurance policy.
Water damage is slightly different. In some cases, such as sudden and unexpected water damage, it may be covered. But in most cases, water damage is not covered under home insurance coverage. This can be fixed by purchasing a separate flood insurance policy and adding a sewer coverage floater onto your policy.
In some cases, incidents that would normally be covered aren't, leading to frustration and thousands of dollars in repairs without assistance. It's important to read your policy closely to understand its limits and exclusions.
After you file a claim on your home insurance policy, an underwriter from the insurance agency will investigate the claim. The underwriter is looking to validate the claim and see if any of the damage could have been prevented. Insurance compensation depends heavily on fault. If the insurance underwriter decides the damage to the home or items are due to the homeowner's negligence, it's likely a claim will be denied. For example, say a storm sweeps in and takes out a portion of your roof. You file an insurance claim, but the insurance underwriter discovers that the roof was not up to date. Since you as the homeowner did not keep your roof updated, you could be denied compensation for the damages. This is also why many insurance agencies will investigate the home, especially the roof, and require updates before agreeing to insure it.
Despite limitations and exclusions, home insurance is critical for all homeowners, no matter where they live. Accidents and environmental damage can't always be prevented or predicted, so it's important to have a policy in place with the right coverage. It’s also important to know the limitations of this coverage.
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