Homeowners Insurance 

Welcome to the Homeowners Insurance Center.  Here you'll find a wealth of information about home insurance which includes tips on keeping your rates low, coverage explanations, geo-specific trends and news, and much more.  Be sure to check out closely related types of personal insurance like car insurance in our personal insurance center.  Homeowners insurance is just one piece of the personal insurance puzzle.  Our Personal Lines Center gives you the expert knowledge you need for Auto InsuranceMotorcycle InsuranceRV Insurance, and Umbrella Insurance.  

Home insurance policies have many different coverage rules so it's very important that when you get a quote on homeowners insurance that you understand what is and isn't covered by your policy.  We've included helpful information about what is and is not included in a standard home insurance policy below.

But don't take our word for it as gospel truth!  Do your own due diligence.  We always recommend using other resources to confirm your own research.  One of those sites is the National Association of Insurance Commissioners (NAIC) home insurance guide.  

The following content will have specific information by state and then an overall guide to homeowners insurance.

Why you need homeowners insurance?

Some people may think that they only need home insurance to satisfy your mortgage company.  Most Americans will use a mortgage when buying their dream home.  Mortgage lenders require that the homebuyer has homeowners insurance but also adds them as a mortgagee to the policy.  When closing on your home, the mortgage lender and/or attorney handling your closing will typically ask you or your insurance agent for a binder of insurance.  The binder will show the lender listed as a mortgagee.  

Being a mortgagee on a home insurance policy basically is the same as being a loss payee.  Because the lender has an insurable interest in the home, they need to be a loss payee on the homeowners policy.  The mortgagee clause establishes that a loss to the home is payable to the lender and stipulates advanced written notice to the mortgagee of policy cancellation.  In fact, it even provides continuing coverage for the mortgagee in the event that the policy is voided by some act of the insured.  Arson would be an example of this type of voiding action by a homeowner. 

Lenders will also require that you use a special form of homeowners insurance which is typically referred to "All Risk" insurance.  These are usually the best types of insurance policies as they provide coverage for a wide array of losses unless specifically excluded on the policy.  Even though this might cost more, it's a good investment.  Lesser policy forms have more exclusions.  If you have a loss that is specifically excluded you might end up having to foot the bill for all the costs to repair the damage to your home.  This includes demolition and debris removal. 

Demolition and debris removal are two coverages that typically have separate limits under a homeowners insurance policy.  When do these coverages come into play?  Let's say a home is damaged due to a fire.  There will be parts of the house unsalvageable that will need to be knocked done.  The cost to demolish the damaged parts of the house is expensive.  Then, the debris must be removed from the property.  Again, this is no cheap task.  There are demolition and debris removal companies who specialize in this work.  If your insurance doesn't cover the loss to your home that you've suffered, you'll end up paying these companies out of your own pocket for their services.

So we've cleaned up the damaged property and removed the debris.  Now what?  Well, your house will most likely look like a doll house that has been thrown in a camp fire and hosed off before totally being burnt to ashes.  The town or municipality that you live in won't take too kindly to that eye-sore in their jurisdiction.  Some states will mandate that if your house is damaged to a certain extent, the entire house would need to be knocked down and replaced (see above for your particular state laws).  Let's assume that 50% of your house has been damaged by a fire and the other 50% of the house has been left undamaged.  Your town may require you to knock down the undamaged portion of your house and replace it along with the rest of the damaged portion.  Is this covered under your homeowners policy?

Ordinance or Law insurance is a coverage that isn't talked about much, but is extremely important.  This is the coverage you'll need to have your insurance company pay for repair to the undamaged portion of your home.  But shouldn't your homeowners insurance policy just pay for this anyway?  Like anything in life, this answer isn't simple.  A standard ISO homeowners insurance policy clarifies that it won't pay for damages to the undamaged portion of a house if it's required to be repaired due to a town or city ordinance.  This is exactly why you need this coverage.  It will be the town or city ordinance that will require you to demolish the undamaged portion of the house.  Now, some home insurance policies will afford a small amount of Ordinance or Law coverage to pay for these types of losses.  But how much is enough?  

Well, again let's say that 50% of your house is damaged due to a fire.  The 50% that is left standing will be subject to demolition by town ordinance.  Let's assume that it will cost a total of $200,000 to rebuild your entire home.  Your insurance will pay for $100,000 for the damaged portion of the house but you'll be left on the hook for the undamaged portion, or $100,000 in construction costs.  Not to mention, it will cost you money to demolish and remove the debris of the undamaged portion of the house.  Now that would be a hefty bill without the appropriate home insurance coverage!

Flood Insurance for Homes

Another common exclusion that many homeowners disregard is flood coverage.  Protection from floods is not covered under a standard homeowners insurance policy unless endorsed.  Floods seem to be happening more often because of hurricanes and other storms.  Super Storm Sandy that hit the northern east cost (New York/New Jersey area) took a particulary devasting toll on many Americans and their homes.  A history of floods that have effective the USA can be found on wikidpedia.  In fact, just go to the list of floods in the United States for more information.  Even if your home is not in a flood zone, a flood can happen anytime, anywhere.  

That is why it's important that we protect against the possibility of it ever happening in our area no matter how rare it might be.  You never thought your house would set on fire and be destroyed until it happened.  Same goes for a flood.  Though not an imminent threat like a fire, a flood can be caused by mother nature for reasons out of our control.  

It's important to distinguish the difference between a flood and a water back-up.  When there is heavy rain, the water that flows through your sewer system may get backed up and get pushed into your home through your pipes.  The most common way to prevent this mishap is by use of a sump pump.  However, some rain storms may be too much for the sump pump or the pump may break or lose power.  When this happens, water will usually flood your basement and destroy everything in it.  The cost to replace your water tampered contents and dry your basement out is not covered under a standard ISO homeowners insurance policy.  The solution is add a specific endorsement to your policy called Water Back-Up Or Sump Pump overflow coverage.  If you don't have this coverage on your home insurance you should consider adding it asap.  

If you have heavy rains and water enters your house, a Water Back-Up endorsement might not be enough to cover your loss.  If the water entered your house above the surface land, this wouldn't be considered a sewer back-up.  In this case, you probably have a flood on your hands and a flood insurance policy would be necessary to cover the damage to your home appropriately.  

What does home insurance cover?

We've discussed some major issues that are presented by gaps in homeowners insurance coverage including Ordinance or Law and Flood Insurance.  Now let's discuss some of the things that the unendorsed homeowners insurance policy will actually cover.  

There are a few main coverages that the policy will afford the policyholder.  We'll list them below:

  • Dwelling: This will cover your primary household and attached structures.  Attached  structures would include your attached garage.  It evens includes the fence that is attached to your house.  Many people confuse the amount of coverage they need here with the market value of the house.  The market value is what you can sell the house for on the open market.  However, this coverage needs to be the replacement cost value.  Replacement cost value is the cost to rebuild the house.  Special consideration needs to be made to account for current labor and material costs in the construction market.  
  • Other Structures: This will cover structures that are detached from the primary house like sheds, pools, and detached garages.  There must be a clear space between the primary residence and the structure.  Typically, a home policy will afford 10% of Coverage A (or Dwelling listed above) for Other Structures.  You should note that you can add more coverage if needed by endorsement.  This is a conversation that you'll need to have with your agent to ensure proper coverage.  
  • Personal Property: This will cover all the contents that you own in your house and may provide some coverage for those contents while they are with you off of your property.  In fact, coverage is usually extended to insure property while it is anywhere in the world while you possess that property.  So, if you're traveling with your own property it would be covered.  However, if you leave your property in storage at another location, it would only be covered for lower limit which is stipulated in your policy.  This limit is usually 10%.  While often misinterpreted as limiting all off-premises personal property coverage to 10% of the Coverage C limit, the actual wording only applies the 10% limit to personal property that is "usually located at an insured’s residence, other than the residence premises." That is, for the restriction to apply, the insured must have more than one residence. In addition, the personal property must be "usually located" there. For example, if the insured has a second home, the Coverage C on the Homeowner’s Policy covering his or her main residence only extends 10% of the Coverage C limit to personal property usually kept at the second home. For personal property the insured takes back and forth, the 10% limit would not apply.  The 10% limit would also not apply to personal property that is usually kept at a residence that is not an insured’s residence. Personal property in storage at a friend’s or family member’s house would not be subject to the 10% limit.
  • Loss of Use: When your home is uninhabitable due to a major loss, you'll need to temporarily stay in a hotel or other safe-haven. This coverage will pay for your major daily living expenses like the cost of your hotel while you're relocated.
  • Personal Liability: This coverage will cover you from lawsuits that arise due to an injury or damages that result from something happening on your premises. This can range from a simple trip and fall injury by a guest to a severe dog bite.
  • Medical Payment: This is a goodwill coverage. Basically, the coverage will pay for the medical bills of someone who gets hurt on your property. It's an extension of goodwill as you'll want to show that you care for them and want to help them. This way they'll be less likely to sue you. But if you do get sued, that is where the previous coverage, Personal Liability, will come into play.

Home Insurance Property Damage Exclusions

A homeowners policy has two main protection sections- property and liability.  The policy will list the exclusions so we're sharing a summary of common exclusions under the policy.  The following sources of loss are excluded under the homeowners insurance policy for property damage loss:

1.     collapse other than that provided in the Additional Coverage Section;  

2.     freezing of a plumbing, heating, air conditioning, or fire protective sprinkler system or a household appliance-when the dwelling is vacant, unoccupied or being constructed, unless reasonable care has been taken to maintain heat in the building, or the water supply has been shut off and the appliances and their systems drained of water; 

3.     freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to any fence, pavement, patio or swimming pool; foundation, retaining wall, or bulkhead; or pier, wharf or dock; theft in or to a dwelling under construction, or materials and supplies used in construction; 

4.     vandalism and malicious mischief when vacant for more than 30 consecutive days;  

5.     wear and tear, marring, deterioration; inherent vice, latent defect, mechanical breakdown;  

6.     smog, rust or other corrosion, mold, wet or dry rot;  

7.     smoke from agricultural smudging or industrial operation;  

8.     discharge, dispersal, seepage, migration, release, or escape of pollutants unless caused by a covered peril;  

9.     settling, shrinking, bulging, or expansion, including resultant cracking, of pavements, patios, foundations, walls, floors, roofs, or ceilings;  

10.  birds, vermin, rodents, or insects; or animals owned or kept by an insured.

Property Exclusions-  Here is a list of the major property exclusions:

  • Ordinance or Law: the enforcement of any ordinance or law regulating the construction, repair, or demolition of a building or other structure.
  • Earth Movement includes the peril of earthquake.  Can be included by endorsement for a premium.
  • Water Damage: flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind; water which backs up through sewers or drains or which overflows from a sump; or water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool, or other structure.
  • Power Failure: the failure of power or utility service if the failure takes place off premises.
  • Neglect: neglect of the insured to use all reasonable means to save and preserve property at and after the time of a loss.
  • War
  • Nuclear Hazard
  • Intentional Loss
  • Weather conditions
  • Acts or decisions, including the failure to act or decide, of any person, group, organization, or governmental body.
  • Faulty, inadequate or defective planning, zoning, development, surveying, site design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction materials used in repair, construction, renovation or remodeling; or maintenance of any property whether on or off the residence premises.

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