A recent study by the National Association of Insurance Commissioners reveals that homeowners are surprisingly unclear about what their policies do and do not cover, and many are, as a result, not carrying appropriate insurance.
Better Business Bureau (BBB) recommends you read the fine print of your homeowners insurance policy closely and check to see if you’re covered against the five most common home insurance hang-ups. You might not be as well prepared for problems as you think.
Mold and other problems due to lack of maintenance or general wear and tear are not covered under most standard homeowners insurance policies. If you live in a damp climate or if your house has survived a flood, mold can lurk and thrive in the walls. Left untreated, mold can become a serious health hazard and an expensive problem to remedy—potentially requiring major renovations.
Owning specific breeds of dogs, such as rottweilers, pit bulls or German shepherds can put your homeowners insurance policy in jeopardy. According to the Insurance Information Institute, one-third of all liability claims against homeowners stem from dog bites, forcing the insurance industry to pay out more than $310 million annually in claims. As a result, insurance companies may increase the rates or outright ban coverage for specific breeds.
Floods and other water damage
According to the National Association of Insurance Commissioners, 33 percent of U.S. heads of household falsely believe that flood damage is covered by a standard homeowners insurance policy. Because the devastation from a flood is typically widespread and costly, many insurers in the U.S. do not even provide flood insurance. In response, the federal government created the National Flood Insurance Program which serves as the insurer of last resort and is available to 19,000 communities.
Most standard homeowners insurance policies don’t cover damage caused by a backed-up sewer system either. Homeowners who found themselves with something as simple as a clogged toilet or as devastating as a basement full of sewage have learned the hard way the importance of reading the fine print on a homeowners insurance policy.
Earthquakes and landslides
While Californians are all too familiar with earthquakes and landslides, the rest of the country doesn’t usually have to worry about them and neither disaster is covered in a standard homeowners insurance policy. A typical earthquake policy carries a very high deductible with the intention of coverage if the house is completely destroyed but doesn’t make it terribly useful if the house is only slightly damaged.
Effectively cover your house and possessions
It’s important to always keep your policy up-to-date and reflective of any major improvements or additions you’ve made on the house. According to a 2006 survey by Marshall & Swift/Boechk survey, homes in the U.S. were undervalued in insurance policies by an average of 21 percent. You also need to take stock of your household goods and make sure that your policy will effectively cover your belongings. Homeowners insurance policies typically cover furniture and possessions up to 50-70 percent of the amount your house is insured for. If you have a lot of high-ticket items, you may want to insure them separately to make sure they are adequately covered.
For more trustworthy advice from BBB on shopping for insurance, go to www.bbb.org.