You buy homeowners insurance because you want it to help you afford the costs of recovering from hazardous events on your property. After all, without it, you could face financial hardships as a result of a claim that has no coverage.
However, you can’t buy the cheapest or most convenient policy option and expect it to provide adequate coverage. Most policies include limitations on when they will pay for coverage. In fact, even high levels of coverage will have their own limits. Therefore, when you make a claim on your policy, your coverage might not pay for 100% of your losses. Why is this?
To limit their own liabilities, insurance carriers comprehensively define when and how much they will pay the policyholder in a claim settlement. Policyholders should always ask their agent where these limitations exist on their policy. Once you know the limits of your policy, you might find that there are ways to increase coverage to your benefit.
Let’s take a closer look at situations where your homeowners policy won’t pay for certain types of losses.
Your Policy Excludes The Damage
Homeowners insurance is supposed to cover you against the ramifications of unexpected or unavoidable losses on your property.
Most policies define what these types of losses are. Some of those that frequently have coverage are:
- House fires
- Severe weather
- Falling objects
Some policies are called named perils policies. The plan will list a number of hazards that it will cover. However, any hazards not listed on the policy will not have coverage.
Other policies include expanded protection known as all-peril coverage. Under this coverage, the only perils listed on the policy will be the excluded perils. Any peril that your policy does not specifically exclude will have coverage.
Certain types of damage will always be excluded from coverage under most policies. For example, standard homeowners insurance usually doesn’t cover flood damage. Flood insurance is a separate marketplace. Most homeowners must buy this coverage separately from standard home insurance.
Fixtures Have No Coverage
Some policies won’t cover certain fixtures on the property, such as outdoor items. When calculating your eventual settlement value, your insurer won’t factor these losses into the claim. So, your settlement cost might be less than the total expense necessary to repair the home.
The Homeowner Intentionally Causes Damage
Insurance fraud is a crime. If an insurer determines that a policyholder intentionally damaged their home to collect insurance money, then they will not pay. The policyholder could also face other penalties, including termination of coverage.
Losses Occur Due to Neglect
Most policies will not pay for repairs when negligence or wear & tear led to household damage. For example, if your roof leaks because it is old and needs a repair job, then your policy likely won’t pay for the repairs.
In another scenario, suppose that a rotted tree falls onto your home during a storm. On a basic level, damage from a tree felled by a storm typically has coverage under your policy. However, the fact that the tree was rotten before the storm struck might indicate to the insurer that proper maintenance would have prevented the collapse. Therefore, your insurer might refuse to pay you.
Damage Costs Less than Your Deductible
Most portions of your homeowners policy include deductibles. A deductible is a policyholder’s financial responsibility for household damage. Their policy won’t pay for a claim unless it exceeds the deductible cost.
Suppose, for example, that you have a $1,000 deductible on your dwelling insurance. If your home sustains damage, your insurer might calculate the repairs to be $3,500. However, because of your deductible, they will expect you to pay the first $1,000 of your repair bill yourself. They will then pay you the remaining $2,500 for your losses.
Any claim that costs less than the value of the deductible will not have coverage under your policy. Therefore, you should choose a deductible that reflects a value you can afford to pay on your own.
Your Policy Does Not Pay Full Value for Damage Claims
Certain types of homeowners coverage won’t pay for repairs or replacement items based on their like-new values. For example, many possessions policies pay for items based on their actual cash values. This is an item’s used value at the time of the loss, rather than its new value.
Suppose, for instance, that someone steals a five-year-old computer in a home robbery. Rather than paying you based on the new value of the computer, the policy will pay its depreciated value. However, you can often upgrade your coverage on specialty items to cover them at their replacement cost values.
It’s sometimes hard to determine when your homeowners policy will and will not pay you. However, when buying coverage, ask your agent to help you learn more about your policy’s limits. If you have any particular assets or liabilities that you want to specifically cover, then they can help you adapt your coverage.
Also Read: How to Minimize Grill-Related Fires at Your Home
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