Homeowners insurance may seem like an extra expense added to your mortgage each month, but you’re stuck with it since lenders make it a requirement. And with the average cost at $1,211, or about $100 a month, you may think everything in your home is covered. Unfortunately, this isn’t true. There is a range of scenarios homeowners insurance doesn’t cover. It’s best to familiarize yourself with these areas to find out how you can protect them in other ways. Otherwise, you could be saddled with surprise expenses that break your budget.
What home insurance doesn’t cover
Let’s jump right in by uncovering which area is not protected by most homeowners insurance, along with a quick explanation of perils and whether or not your policy covers them.
- Flood damage: A standard homeowners insurance policy doesn’t cover any damage caused to your home’s structure or personal property by flooding. When picking your homeowners insurance policy, you may be able to add on up to $250,000 in coverage.
- Pest infestations: Homeowners insurance doesn’t cover pest infestation like termite damage and supplemental coverage isn’t available. Instead, you must keep up with routine maintenance with annual pest control visits and other proper care.
- Earthquake damage: An earthquake is another natural disaster not covered by your insurance policy. But if you live in an area prone to this type of phenomenon, you can add extra coverage.
- Sewer backup: You should make sewer maintenance part of your routine home maintenance because you won’t get reimbursed for damage with a standard insurance policy. Sewer backups are increasing at 3% each year, so it’s smart to pay attention to your systems’ age and plan to rectify any outdated lines before they damage your home. Alternatively, consider adding a sewer backup policy to your existing insurance — just check to see how limited coverage may be.
- Normal wear and tear or neglect: Your insurance company expects you to keep up with routine care of your home. Any type of negligence or wear and tear of appliances and systems aren’t covered. Keep up with care on areas like siding and crawlspaces to avoid rot and mold. If you have aging appliances, a home warranty could help offset repair and replacement costs.
- Attacks by certain dog breeds: You’ll likely be asked about your dogs when applying for home insurance because certain breeds aren’t always covered. You can either compare quotes from multiple insurance companies to see if they ask you about your dog’s breed. Or you can add on extra liability coverage specifically for your pup.
- High-value items: Personal property is covered when damaged by named perils. But different categories of property have their own limits of how much is covered. Look for the best homeowners insurance that either comes with higher limits or get supplemental coverage to insure your higher value items.
- Certain types of high-risk property: Ask your insurance company if there are any limits on damage caused by certain high-risk items, like trampolines or pools. Because injuries are more likely, you may need additional liability insurance if someone is injured while on your property.
[ Read: The Complete Guide to Home Insurance ]
What home insurance covers
- Covered perils allow you to get reimbursed up to your policy limit for both personal property and the structure of your home. There are several types of homeowners insurance, but most include the same covered perils.
- Many natural disasters are covered, including damage to your home or belongings caused by fire, lightning, windstorms, hail, volcanic eruptions, smoke or the weight of snow or ice.
- Other events caused by humans are covered, including rioting, vandalism, theft or damage caused by aircraft or vehicles.
- There’s also some coverage for your home’s systems, such as damage caused by frozen pipes or accidental surges from your hot water heater or air conditioning.
Here’s what’s covered in your home when damage is caused by one of those covered perils.
- Home’s structure: Also known as dwelling coverage, the structure of your home should be insured for the amount it would cost to completely rebuild it. You should take into account any upgrades you’ve made, total square footage and construction costs.
- Personal belongings: You can choose how much coverage you want for your belongings, which is usually between 50% and 70% of the amount of your dwelling coverage. Add more if you have certain expensive items, like jewelry or electronics.
- Liability protection: Liability covers you in case someone gets injured on your property and sues you. The minimum amount required in your policy is usually around $100,000 but the Insurance Information Institute recommends $300,000 to $500,000.
- Additional living expenses: Additional living expenses cover the cost to stay elsewhere while your home is being repaired from a covered event. Consider having this part of your policy amount to about 20% of your dwelling coverage.
How to check your coverage
It’s smart to understand your homeowners insurance policy, what’s covered and for how much. You should receive a copy of your policy when you first take it out and then receive annual updates on any changes to your coverage or premium amount. Ask your insurance company for another copy if you can’t find yours, or check to see if it’s available online.
With your policy in hand, the first part to look at is the declarations page. This includes details like the property address, policy number, types of coverage and the limits to each section of your policy. For example, the declarations page lists property coverage, including subcategories like dwelling, other structures, and personal property — then a limit on how much you may receive in a claim.
You’ll also see the amount of your deductible, which is your financial responsibility anytime you file a claim. The amount you pay for your annual premium will be listed, and so will any policy discounts you receive. Finally, any type of supplemental insurances (like flood or extra liability) will be listed as well.
Review each line carefully. If you discover the premium amount is higher than you anticipated, consider finding a cheaper home insurance company.
[ Next: What Common Home Repairs Cost ]
Types of home insurance
There are multiple types of homeowners insurance, each of which covers (and doesn’t cover) certain perils.
HO-1: Basic form for homeowners. This policy only covers 10 perils and is the most basic type of homeowners insurance. However, it’s not very common to find anymore because its coverage is so lacking.
HO-2: Broad form for homeowners. This is a budget-conscious policy that is more robust than the HO-1. It covers the structure, personal belongings and sometimes personal liability, but only for named perils.
HO-3: Special form for homeowners. This policy is different in that it has open-peril coverage. That means any event is covered except for those specifically listed as exclusions. Personal property is usually only covered by named perils. It’s the most common type of policy among homeowners.
HO-4: Tenant’s form for renters. Also known as renters insurance, this policy doesn’t cover the structure since that should be handled by the landlord. Instead, it covers your personal belongings and may also offer liability coverage.
HO-5: Comprehensive form for homeowners. This higher-end policy includes open-peril coverage of both your home’s structure and personal belongings. You may also get higher limits for your personal property. Expect it to be more expensive than other types of homeowners insurance.
HO-6: Condo form for condo or co-op owners. This covers the interior structure of your condo, personal property and personal liability. The interior structure of your home is covered, while the exterior is generally covered by the homeowners association. Personal property and liability are also included.
HO-7: Mobile home form for mobile home owners. This policy acts like HO-3 coverage but is specifically designed for manufactured homes.
HO-8: Older home form for homeowners. If your home is 40 years or older, you’ll need this specialized policy to account for a higher replacement cost for the property’s structure.