What Your Home Insurance Doesn't Cover

Fire-setting teens. Biting dogs and terrorists. Creeping mold and earthquakes.
The list of exclusions keeps growing, so think about the risk factors in your life and check your policy.


 By Liz Pulliam Weston

Most people think about their homeowners insurance only a few times in their lives: when they select their insurer, when they’re writing premium checks and when they have a claim.

By the time something goes wrong, however, it’s usually way too late to begin learning about your policy.

That’s never been more true than right now. Premiums are shooting up, and insurers are trying to stem huge losses by refashioning their policies -- leaving you more exposed than ever.

There are some gaps in your coverage you can’t do anything about, of course. Insurers aren’t going to cover you for a nuclear accident, for example, no matter how many companies you ask.

Many so-called “exclusions,” though, vary by the insurer. If you know about them in advance, you may be able to switch carriers or buy extra insurance to stay protected. So pull out your policy and check for the following:

Mold and water damage

A year ago, if a pipe burst in your home, your insurer would probably pay for the damage, including mold remediation. Now you may not be covered for the mold.

A huge increase in mold-related claims in Texas, California, Florida, Nevada and Arizona has many insurers scrambling to eliminate or at least reduce their exposure.

Regulators in 35 states are now allowing insurers to cap their mold coverage or exclude it from homeowners policies altogether, said Dave Dasgupta, spokesman for the Insurance Services Office, which supplies statistical data to property and casualty insurers. Many insurers are limiting how much they’ll cover for water damage, as well.

While not all insurers are taking advantage of the opportunity, you should check your policy now and when you renew to see if you’re covered and for how much. You might be able to get more coverage from another insurer if you shop around.

War, nuclear accidents and terrorism

If your home is burned down in a riot or other “civil commotion,” your insurer probably will pay to rebuild it. If your home is damaged by an invading army or is irradiated by a nearby power plant, however, you’re not covered. If your house is destroyed during a terrorist attack, you also may be on your own.

Insurers have long excluded war and nuclear accidents from the list of perils they cover. Until Sept. 11, though, most homeowners’ policies either covered terrorism or were silent on the issue, which usually implies coverage.

Since the World Trade Center attacks, an increasing number of insurers are specifically excluding terrorism coverage from their personal insurance lines, such as homeowners, in addition to banning it from their commercial coverage.

Nine states (Arizona, Colorado, Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota and South Dakota) essentially allow any insurer to exclude terrorism coverage on their homeowners policies. Other states, including California, are approving the exclusions on a company-by-company basis.

Natural disasters

If your home burns down in a wildfire, you’re probably covered if you live in a developed area. If you live in a remote cabin or your home is rattled apart by an earthquake, inundated by a flood or blown away in a hurricane, you may not be.

The more likely you are to be a victim of a natural disaster, the more reluctant insurers may be to cover you. That’s why residents of the Gulf Coast or Atlantic states typically need to supplement their homeowners insurance with hurricane coverage offered by a high-risk pool. California residents, meanwhile, get earthquake coverage from the state-run California Earthquake Authority or from a handful of insurers willing to write earthquake policies.

Many insurers won’t cover fire risks for people who live in forests or far from fire stations. That’s true even though some of the biggest wildfire losses have come in developed areas: the Oakland Hills fires of 1991, for example, or the Laguna Beach and Malibu fires of 1993. Most of those homeowners were covered for their losses.

Floods, meanwhile, aren’t covered under homeowners insurance policies. The National Flood Insurance Program, run by the Federal Emergency Management Agency, offers coverage.

If you’re the victim of a landslide, however, you’re pretty much on your own. That kind of “earth movement” usually isn’t covered, so it pays to get a geologists’ report before buying any home near a cliff or on a hill.

Neglect

If a tree topples over in a windstorm and crushes your house, you’re covered. If your home collapses because of a termite infestation, you’re probably not.

Insurers expect you to take care of your home and deal with any maintenance issues on your own dime. Insurance generally covers “sudden and unexpected” losses -- not losses from termites, rodent infestations or a water leak you never quite got around to fixing. You’re expected to detect the problem and prevent the situation from getting out of control. If you don’t, any damage done typically won’t be covered by your insurer.

Bruce Johnson, author of “50 Simple Ways to Save Your House,” recommends you conduct regular inspections to detect such problems. At least twice a year, tour the exterior of your home looking for cracks, decay or water damage. Check the condition of the roof and inspect the basement or crawlspace for other hidden problems, including rodent droppings, termites or leaks. If you find a problem, fix it. Remember that home maintenance problems usually just get more expensive.

Dogs

If you own a toothless Chihuahua, your insurer probably doesn’t care. Buy a pit bull, Rottweiler or wolf hybrid, however, and you may find your insurance gets more expensive -- if you can persuade your insurer to cover you at all.

Dog bites cost insurers about $310 million a year, and an increasing number of companies have a blacklist of breeds they won’t accept or charge more to cover. Pit bulls, which lead the Centers for Disease Control list of deadly breeds, are particularly unwelcome. Other troublesome breeds include German shepherds, Rottweilers, wolf hybrids, huskies, malamutes and Dobermans.

If your dog has ever bitten anyone, regardless of its breed, you’re probably going to have trouble getting coverage as well -- particularly if it was an unprovoked attack.

Each insurer has different policies, though, so you may be able to find affordable coverage if you shop around. You also can ask the insurer to exclude your dog, meaning that you’ll pay for any damage it does.

If you have a dog that bites or lunges at strangers, however, get rid of it. The risks to your pocketbook and your neighbors are too great.

Intentional damage

If your ex sets fire to your home, you’re probably covered. If the fire is started by your rebellious teenager or an estranged spouse, however, you may not be.

Intentional damage by an insured person -- or by the person’s spouse, children or relatives living in the house -- typically isn’t covered. Estranged spouses often come into a gray area. Although they may not live in the home, they may be listed on the policy or the property deed and be considered to have an “insurable interest” in the home. Companies have, in fact, made this argument to deny or limit coverage to homeowners whose property was damaged by an estranged spouse.

Victims’ advocates complain these policies are unfair, since there’s often no way to prevent such damage. If you’re worried about the risk, however, it may motivate you to get help for a destructive teen, beef up your home’s security system or reach a quicker divorce settlement.

Computer equipment

If you have a personal computer or two, your homeowners insurance may pay you enough to buy a new one -- or it may not. If you’re running a home business, however, your homeowners insurance almost certainly will fall short.

Here’s another area where it pays to read your policy. Some insurers will give you a check only for what your computer equipment is worth now, which is probably a fraction of what you paid for it. Even those that do pay for replacements typically have a cap, often about $2,500. Many require you to have supplemental coverage if you want a bigger check than that, or if you run a business from your home.

Read your policy, note the limits and talk to your insurer about supplemental coverage if you need more.

Luxury items and collectibles

If you don’t own anything special, the entire contents of your home are probably covered under your homeowners policy. If you have antiques, guns, jewelry, collectibles or fine furs, you may need extra coverage.

The typical policy limits coverage for luxury items and collectibles. You might get as little as $200 for the coin collection you were hoping would fund Junior’s college, or $1,000 to cover all your jewelry, watches and furs.

Once again: Check your policy, and buy supplemental insurance if you want more coverage.

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