Reading the Fine Print of Home Insurance Policies

What do hospital gowns and insurance policies have in common?
You’re never covered as much as you think you are.

For homeowners, there are few worse surprises in life than finding out the disaster you think is covered in your home insurance is nowhere to be found in the fine print.

We know pursuing insurance documents isn’t riveting reading, but knowing the details of their home’s insurance policy from first paragraph to closing sentence is a must for all homeowners, especially those with homes at risk for major damage.

The first question every homeowner should ask themselves when purchasing homeowner insurance is What does my homeowner insurance cover? Fire, lightning and windstorms? Check. Flooding? Not in most standard home insurance packages. Zombie invasion? Better check on that.

So what do most homeowner insurance policies cover? A basic home insurance policy, often called HO-1, covers home and possessions if they’re damaged and destroyed by these factors:

  • Fire
  • Lightning
  • Windstorm (unless you live in a hurricane zone)
  • Hail (not available everywhere)
  • Explosion
  • Riots
  • Civil commotion
  • Aircraft (and things falling from aircraft)
  • Vehicles (and things thrown from vehicles)
  • Smoke
  • Vandalism (although some policies exclude this)
  • Malicious mischief
  • Theft
  • Volcanic eruption (a most for homeowners living in Hawaii)

For more comprehensive protection, insurance agents recommend homeowners with especially at-risk property purchase an upgraded policy called HO-2. HO-2 policies offer an expanded list of covered perils including:

  • Falling objects
  • The weight of ice, snow, or sleet
  • Flooding from your appliances, plumbing, HVAC, or fire-protection sprinkler system
  • Damage to electrical parts caused by artificially generated electrical currents (such as a power surge not caused by lightning). But damaged electronics such as computers aren’t covered.
  • Glass breakage
  • Abrupt collapse (for example, termite damage)

HO-3, the most complete homeowners insurance, covers all perils – including sci-fi scenarios like zombie invasions! – except specific ones like:

What’s Not Covered?  

No home insurance policy is completely disaster proof. There are a number of ecological and weather threats not covered in policies. Typical homeowner policies don’t cover:

  • Hurricanes
  • Floods
  • Earthquakes
  • Mudslides
  • Landslides
  • Sinkholes
  • War
  • Nuclear accidents
  • Sewer backups
  • Sump pump failures
  • Ground movements and holes caused as mining (known as mine subsidence)

The things that aren’t spelled out in the big print of policies can be harder for homeowners to determine. Here are the most common homeowner policy questions:

Damage or loss of personal belongings

A tricky issue that most standard policies offer coverage for, even outside of the home. Policies covers family’s belongings, even when you take them out of your home. For example, when a child heads to college with a laptop and it’s stolen, that’s likely covered in your homeowners insurance policy. Policies will state that personal belongings are insured for replacement cost or cash value.

A note of caution: Additional insurance may be required for expensive items like jewelry and antiques.

Temporary living expenses

In the event of disasters that make your home temporarily uninhabitable, your homeowners insurance covers your living expenses, including hotel bills and meals. Policies will have limits on the length of hotel stays and how much you can spend.

Injuries or home accidents

Homeowners insurance coverage includes liability – which provides security when you or your family members cause injuries or damage. The provision also applies to medical payments resulting from dog bites and if someone falls or injures themselves on your property.

The best, most certain way to know what your home’s insurance policy covers? Read it cover to cover and go over any questions you have with your insurance agent. Reading an insurance policy lacks the thrills, drama and suspense of great David Baldacci, Nicholas Sparks or Stephen King novels, but it’s the most important reading a homeowner can do.

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