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Homeowner’s Insurance Puzzles: Is This Covered?
Guest Author: Mark Decherd

To say that homeowner’s insurance is confusing is an understatement. Take water damage claims for instance. If you leave the faucet on and the sink overflows, your insurance company may very well pick up the tab! Yet, if a storm surge inundates your home, your insurance probably won’t pay a penny. So, what’s covered? What’s not covered?   

Most homeowner’s insurance policies are HO-3 policies. This type of policy has property insurance and personal liability components and provides coverage from the home and structures for all risks other than those that are specifically excluded with earthquakes and floods commonly excluded.   

So, if you have a standard HO-3 policy that specifically excludes earthquakes and floods and you have not purchased supplemental policies for these risks, then guess what? If your home is damaged in an earthquake or flood, you’re on your own. It’s tricky though. What if water poured into your home through a door that was blown off by hurricane force winds? Your insurance company may determine that the high winds caused the water damage.   

The first step in figuring out whether or not damage is covered is to read your policy. What type of policy is it? What exclusions are spelled out? What is your deductible? And is there a separate deductible for certain types of claims?   

It never hurts to check with your insurance agent either. For example, you might feel pretty silly for leaving the faucet on overnight, but you’ll feel even worse when you find out that it will cost over $5000 to replace the hardwood floors and another $5000 to replace the cabinets. If you’re unsure after reading your policy, a quick phone call to your agent can clarify whether or not the water damage is covered. Hint: Water damage from sink and tub overflows is often covered by insurance.   

What if the water soaked through the walls and ruined your $300,000 art collection? Unless you have purchased additional insurance, you’re probably out of luck. Most insurance policies limit coverage on fine art, jewelry, coin collections, and even cash. This makes it critical to understand exactly what your policy covers and what it excludes, preferably before a loss occurs. That way, you can purchase additional insurance coverage for your valuables.   

In many states, particularly those prone to hurricane losses, a separate deductible applies to hurricane damage. You may have a smaller $500 deductible for damages such as theft and broken pipes and a much larger deductible for hurricane or windstorm damage. This means that if a pipe bursts in your home, you’d pay $500 out of pocket, but if a hurricane damages your home, you’d pay a lot more. Imagine living in a $300,000 home subject to a 5 percent hurricane deductible. Under these circumstances, you’d be responsible for $15,000 out of pocket!   

Another confusing area involves the cause of the damage. For example, a leaky roof that is ten years past its prime and simply worn out is not likely going to be replaced by your insurance company. You are responsible for maintaining your home and this example falls under the general home maintenance category. On the other hand, if the roof damage was due to a hailstorm or your neighbor’s tree crashing through it, your insurance company will be involved.   

So, is it covered? No matter what type of loss you have suffered, reviewing your policy and its terms and conditions is step number one. Your insurance company or agent can help you determine if your loss is covered. Another good source of information is your own contractor. Ask your contractor if this
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