Whether you're an established homeowner or buying your first home, you already know that having a solid homeowners insurance policy is a crucial piece of the puzzle. But do you know what is NOT covered on your homeowners insurance policy? Most don't. So this article is designed to introduce you to several non-covered items (referred to as "exclusions" in insurance language) that seem to be the most common sources of claims.
I've also indicated if there's a solution to these exclusions, such as an endorsement that allows you to "buy back" coverage. And for those folks that want to know, I am pulling these exclusions from the most common homeowners insurance policy- the HO 0003 (edition 04-91).
Since the homeowners insurance policy contains sections for both property coverage and liability coverage, it makes sense there would be exclusions for both sections as well. We'll start with the Property exclusions.
While Ohio isn't exactly known for its earthquake activity, that's certainly not true in other parts of the U.S. So, yes this exclusion includes a full blown earthquake, landslide, volcanic eruption, sinking earth and even mine subsidence.
Side note: mine subsidence can be a problem in Ohio since many towns were built over old coal mines and these mines can collapse. Mine subsidence is an available endorsement for certain counties in Ohio.
Many insurance companies offer an earthquake endorsement, but depending on where you live, you may have to buy a separate earthquake policy. In Ohio, the earthquake endorsement is the standard. Most earthquake endorsements offer a 2% or 5% deductible. The percentage deductible often throws people- it's usually based on a percentage of the house amount or contents amount, whichever is greater. For this example, if you have $200,000 for your house, with $150,000 for contents, and the deductible is 5%, your deductible is $10,000.
Water damage is a pretty big category and includes such things as flood and water backup through sewer, drain or sump pump. Extremely heavy rains often cause flood conditions- ever had surface water come into your basement? This would qualify under the exclusion. Although you can't buy back flood coverage on a homeowners insurance policy, you can buy a flood insurance policy. We don't write flood policies (because we just don't have the demand), but you can learn more about flood insurance through FEMA and the National Flood Insurance Program.
As for water backup through sewers, drains or sump pump failure, luckily that is available by endorsement. Premium is pretty minimal and provides coverage for both the damage caused (and its subsequent repair) but also for the clean up. In these situations we recommend a place like ServiceMaster or ServPro- professionals that know exactly how to clean up water and prevent mold, mildew, etc. For additional information about Water Backup coverage, including sample coverage and premiums, please read our article "Warning: Water Backup Claims Can Happen Anywhere in Your Home."
This means any loss arising out of any act committed:
(1) By or at the direction of an "insured"; and
(2) With the intent to cause a loss.
A great example of this is arson. If you set fire to your own house, the insurance company is not going to pay the claim. Yep, an accidental fire is covered, but not one you deliberately set yourself with the intent to collect the insurance proceeds. This also explains why some fire claims may seem to take a while- the insurance company must investigate all fires first to determine cause.
Arising out of or in connection with a business engaged in by an insured
The simple reason for this exclusion? Because there are business liability policies you can buy instead that are designed to properly protect your business. Some companies may offer a home-based business endorsement depending on the type of business you have (not every business would qualify). But for many businesses, a business liability policy (also referred to as commercial general liability) is the way to go.
Similar to the business liability example above, the reason motor vehicles are excluded is because policies for motor vehicles exist (think auto, motorcycle, RV, etc. There are a few exceptions to this exclusion, so that's your buy back. I've listed those below.
(1) A trailer not towed by or carried on a motorized land conveyance.
(2) A motorized conveyance designed for recreational use off public roads, not subject to motor vehicle registration and:
(a) Not owned by an "insured"; or
(b) Owned by an "insured" and on an "insured location";
(3) A motorized golf cart when used to play golf on a golf course;
(4) A vehicle or conveyance not subject to motor registration which is :
(a) Used to service an "insured's'' residence:
(b) Designed for assisting the handicapped; or
(c) In dead storage on an "insured location"
This one could get a little tricky depending on state laws, so when in doubt, CONTACT your insurance agent to see if your motor vehicle qualifies for the exceptions to this exclusion.
Similar to the motor vehicle exclusion discussed above, watercraft is also excluded for similar reasons (policies for watercraft exist, and are often a much better option). There are some situations where the exclusion does not apply. Due to the length of the exceptions to the exclusion, I am not going to list the policy language. Instead, below I've listed some features of the watercraft that will help determine whether or not your watercraft may qualify for an exception to this exclusion. AGAIN, if you have questions about your specific watercraft, CONTACT your insurance agent to get the right answers.
1) Horsepower of watercraft- for example, the exclusion talks about 25 HP being the max for an owned watercraft. Some companies may allow 50 HP to be covered under the homeowners insurance policy. When in doubt, ask!
2) Type of motor- outboard vs. inboard vs. inboard-outdrive
3) Length of watercraft- 25 feet is seen a lot in the exclusion.
So it appears that motor type and horsepower, along with length helps determine whether you get any liability coverage under the homeowners insurance policy or you need separate watercraft insurance.
Although an homeowner insurance policy has several exclusions, what I've discussed here are the most common examples of what is not covered on your homeowner insurance policy (meaning biggest source of claims issues). If you have questions or wish to discuss your homeowner insurance, please call us at (937) 592-4871. You can also contact us via our website OR request a homeowners insurance quote now. We're happy to help!