Home insurance exclusions: what your policy won’t cover

By Insure.com
(Last updated February 12, 2003)


Do you know in which of these situations your homeowners insurance will cover your loss?

A) A foreign army invades the United States, destroying your house in the process.
B) A car careens around a curve and drives into your living room.
C) A skunk gets into your house and now everything you own stinks.

You're not covered if an invading army destroys your house, but you are covered if your house is either hit by a car or overrun by a skunk.

Knowledge is your best defense as a consumer. So, when disaster strikes your home, be it in the form of the Russian Army or your neighborhood skunk, you'll know what to expect from your insurance company.

Knowing exactly what your homeowners policy covers and what is excluded also helps you figure out if you need to purchase special coverage for the exclusions.

“You want your policy to cover any major purchases or additions to your home.  You don’t want to spend money for coverage you don’t need,” advises Krista Fischer of the Insurance Information Service of Oregon and Idaho.  “You will want to add that new computer but that five-year-old fur coat is no longer worth the $15,000 you paid for it, so you will want to reduce your floater and pocket the difference,” Fischer adds. 

A quick primer on standard home insurance exclusions

The first thing to know about exclusions is they vary by policy type. An HO-1 policy covers a half-dozen perils: fire and lightning; windstorm and hail; explosion; riot and civil commotion; damage from vehicles; and theft.

An HO-2 policy covers those perils, plus six more: falling objects; weight of ice, snow, and sleet; accidental discharge or overflow of water from the plumbing; sudden and accidental tearing, cracking, burning, or bulging of a steam or hot-water heating system; freezing of plumbing; and artificially generated electrical current.

An HO-3 policy is often called a "broad-risk form," because it covers everything except the exclusions outlined in the policy. According to statistics from the National Association of Insurance Commissioners, 84.2 percent of homeowners have an HO-3 policy.

The standard HO-3 policy contains a number of exclusions, including:

“There are two basic questions to ask any agent or company representative,” says Frank Fitzgerald, Michigan’s Commissioner of Financial and Insurance Services. “What losses does your policy cover, and what losses are not covered by the policy? In addition to these questions, you should ask what additional coverage you might need given your situation,” Fitzgerald adds.

When are you covered?

A wild animal gets into your house and wreaks havoc:

Covered. You're covered for this, as long as the animal is not a rodent, which isn't covered. You're also not covered if you own the animal that caused the damage. If a rodent or a pet does something that causes a fire, you are covered for the damage caused by the fire.

Termites, cockroaches, mice, or rats infest your home:


Not covered. This falls under the general exclusion of "wear and tear." Insurance companies don't consider a pest problem to be "sudden and accidental," but rather part of routine maintenance around the house. (Sudden and accidental damage is covered.) For more information, read What to expect if your house is infested.

 

Building-code upgrade:


It depends. If your home is damaged for some reason and you need to upgrade it when you rebuild or repair, some policies will pay out if you need to upgrade to meet local building codes. Check your policy to see if this applies to you.

 

Water damage:


It depends. Damage from floodwater is definitely not covered. For protection against that, you'll need flood insurance. (Learn more about flood insurance in Who needs flood insurance?) Water coming into your home from backed-up sewers is typically excluded, but you can purchase optional coverage to protect yourself from this.

 

Your home's value plummets because a prison or a huge shopping mall is built on your block:


Not covered. Selling cost is not insurable. Your house is insured for the amount you'll need to rebuild it and replace the contents.

 

Power outages:


Some coverage. Every policy contains coverage for the loss of food in your refrigerator and freezer, usually up to $500. Electronics, such as your computer, are not covered under standard homeowners policies if there's a surge when the power comes back on.

 

A company dumps pollutants into a
stream that runs through your property:


Not covered. If something like this were to occur, the offending company will be stuck with the clean-up bill — probably after a lengthy court battle. (Some policies contain coverage to clean up oil spilled in your house when your oil company fills your tank.)

 

Lightning strikes a power line leading into your house:


Covered. This is one of the basic coverages. Any damage caused by lightning — such as fire or damage to electronics from a surge — is covered.

 

An appliance catches fire or your hot-water heater explodes:


Covered. This is an instance of what insurance companies call a "sudden and accidental loss."

 

 

Soot from burning candles covers your house and your belongings:


Not covered. This is, on the other hand, the exact opposite of a sudden and accidental loss. The soot accumulates on your belongings over a period of time and is not sudden. The loss is also not accidental since the homeowner is the one burning the candles that produce the soot.

 

 

You're running a small business from your home and a fire destroys your computer equipment:


Not covered. A business run out of your home should be insured separately because your homeowners insurance won't cover any losses associated with it. For more information on this, read How to shop for home-based business insurance.

Mary Bonelli of the Ohio Insurance Institute says anyone running a business in a home should carefully read the fine print of his homeowners policy, and talk with his agent or insurance company. “While a simple home office might require only an endorsement to a standard homeowners policy, a hair salon, day care or construction business poses greater potential liability and probably requires a separate business insurance policy,” Bonelli says.

Less common occurrences

A religious phenomenon damages your home:


Covered. Every now and then you'll hear about something unusual, such as a house where oil is pouring out of the walls for no apparent reason and the Virgin Mary appears in the oil. If that happens to you, and you make a claim for the damage done to your walls, you're covered.

 

Planes, trains, or automobiles hit your house:


Covered. Cars and trains fall under coverage for damage from vehicles hitting your house, while airplane damage is paid for by coverage for objects falling out of the sky.

 

An anti-government militia invades your town,
destroying your home in the process:


Probably covered. A terrorist act such as this would probably not fall under the exclusion for war. Your insurer might have to examine these events on a case-by-case basis.

 

A nuclear power plant goes on the fritz
and irradiates your home and all of your possessions:


Not covered. Nuclear accidents are a standard exclusion. You'd have to go to the power company that owned the nuclear plant and get it to pay up.

 

Your house slides down a cliff:


Not covered. If you build or buy a house on a cliff, hopefully you are aware of the risks involved. Your standard homeowners policy won't pay if your house slides down because of a landslide or any other reason. Your best bet is to check with your agent about getting coverage for such an event. (If you live in California, be aware that your California Earthquake Authority policy will cover earth movement only if it is seismically induced, so if you live on a cliff overlooking the Pacific, you will need additional coverage.)

 

Your house is swallowed by a sinkhole
because it was built over an old coal mine:


Not covered. This is a problem for homeowners in the Coal Belt states, including Illinois, Ohio, Pennsylvania, and West Virginia. While your homeowners policy doesn't cover this, you can purchase coverage (known as mine subsidence insurance), usually from your state's Mine Subsidence Authority. Check with your state's department of insurance or your agent.

 

A meteorite plummets to Earth and lands in your family room:


Covered. This, like an airplane hitting your house, is in the category of objects falling from the sky.

Check your policy

The best way to find out about exclusions is to read your homeowners insurance policy. If you come across something you don't understand, ask your agent or insurance company about it.

 

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