What Your Homeowners Insurance Might Not Cover

The days are getting warmer, which means we’ll be heading outside, cleaning up the yard, opening the grill and getting the kids outside and away from their electronic devices. As you make your to-do list to get ready for a summer outdoors, take time to check your homeowners property insurance policy. You may be surprised to see what your insurance covers and what it doesn’t cover.

For example, over the next several months with warmer weather on the way, many parts of the U.S. will be at risk for flooding. If you live in a flood zone or an area prone to hurricanes, you might want to consider flood insurance, as it is generally separate from your homeowners policy and provided by the National Flood Insurance Program (NFIP).

Here are seven additional areas that may not be covered by your homeowners insurance:

1. High-risk items. If you own a trampoline, a treehouse, a skateboard ramp, playground equipment or a pool (especially one with a diving board and slide), check to see if these items are considered exclusions and require a special rider. Consider an umbrella policy to cover your potential liabilities and be sure to implement all safety precautions associated with each item.

2. Natural disasters. Floods, earthquakes, sinkholes, wildfires and landslides are considered a natural disaster and might not be covered under a standard policy, especially if you live in a high-risk area for such events. Coverage can be tricky for these events given that wind damage from a hurricane is usually covered but the flood damage is not. Wind damage in hurricane-prone areas along the Gulf Coast or Atlantic Coast, however, may require an additional premium.

3. Pests. Damage caused by termites, rats or mice, as well as the cost to eradicate any infestation such as bed bugs is not coverable. Be sure to take action immediately once you see any sign of unwanted pests in your home before an infestation becomes an expensive reality.

4. Pet attacks. While most pet attacks would be covered by your insurance, those by dog breeds considered high-risk would not. These can include (but are not limited to) Pit Bulls, Dobermans, Rottweilers, German Shepherds, Akitas, Mastiffs, Great Danes, Chow Chows and wolf-hybrids. Some insurers may deny you coverage entirely, while others will charge you more or exclude any liabilities related to the dog. If you have a potentially aggressive pet, you may want to purchase additional liability coverage through an umbrella policy.

5. Expensive personal belongings. Many homeowners policies limit or exclude coverage of precious possessions like jewelry, fine art, computers, golf clubs, oriental rugs and other antiques or collectibles. Separate riders need to be added to your policy to protect your valuables.

6. Mold. Your policy may either exclude coverage of mold damage or place stringent limits on how much damage it will cover. Again, you can purchase extra coverage for an additional premium, which may be worthwhile if you live in a more humid environment.

7. Renovation and rebuilding. Damages caused to your house during a renovation are not covered by your homeowners insurance, so be sure that the contractor has business liability insurance as well as workers’ compensation. Similarly, if your house is destroyed and needs rebuilding, understand that the total cost of rebuilding could be much more than the insured value or even its current market value. If you have done a renovation, you should adjust your homeowners policy to reflect the greater value of your property following your renovations.

Replacement Value vs. Actual Cash Value

It is important to understand what you can expect to receive from your homeowners insurance should you have a loss. Replacement value and actual cash value are two of the most common methodologies used to determine what you receive from your insurance carrier in the event of a loss:

• Replacement value is the actual cost to replace an item or structure to its pre-loss condition.
• Actual cash value determines the value but then takes a deduction for depreciation.

For example, let’s say you have a fire in your kitchen and need to make a claim. Your appliances are all in great shape but are ten years old. Under the actual cash value method, once depreciation is deducted, you may receive an amount that will not cover replacing the appliances.

However, if your policy provides for replacement value, the cost of similar appliances that can be purchased today determines the compensation amount you will receive.

Replacement value is generally more expensive but in the event you have a loss, you will be glad you paid for the extra coverage. Take the extra time to review with your insurance agent the type of coverage you have so there are no surprises.

Protecting your property helps protect one of your most important investments—your home—and can give you peace of mind. Take the time now to make sure you have appropriate coverage for your situation.