Know What Home Insurance Typically Doesn’t Cover and Why
Imagine you’re remodeling your bedroom and you discover that a colony of termites is making a meal of your home. After the initial shock wears off, you may wonder if your home insurance covers this problem. The answer to this question is often “it depends.”
There are two main reasons that a peril, like termites, may not be covered by your insurance. The first is that home insurance is meant to protect against sudden, unexpected loss, so the damage caused by a chronic, long-term issue is probably uncovered, or “excluded.” The second reason is that there are some types of perils that are simply too risky for the insurance company to protect against — at least without having to charge astronomical premium costs.
The type of your homeowners policy dictates what is excluded. Without getting too technical, homeowners insurance policies come in various types of protection, denoted as HO1, HO2, HO3 and so forth. HO3 is the most common type because it usually offers a good combination of coverage and value. An HO1 policy is typically cheaper, but it lacks coverage for many perils. HO4 and HO6 are for different types of living situations: HO4 policies are for renters while HO6 policies are for condominium owners.
Keep in mind that the following risks are often excluded in the typical HO3-level policy.
Mold falls into the category of a chronic, long-term issue, and therefore it is usually excluded. You can purchase mold coverage with a special insurance add-on called a “rider,” but at best these riders are capped at a $5,000 maximum mold payout, which may not entirely cover the costs of remediation. And any type of rider must be added before a problem is discovered.
This type of coverage is almost always excluded, and adding a rider may be extremely expensive or even impossible. This is because, in areas prone to these natural disasters, the financial risk is far too great for the insurance company. FEMA will step in to help homeowners when a disaster is declared, but its assistance may be inadequate. Talk to your agent about your options.
This coverage depends on what causes the water damage. If it’s a pipe or roof that has been slowly leaking for months, that’s a chronic issue and it likely will be excluded. If a pipe suddenly bursts, the cleanup should be covered by your insurance, though the repair of the pipe may not be, depending on what caused it to burst. For water backup, a special rider is usually needed.
Termites and Critters
Although the discovery of a termite infestation in your walls or a family of raccoons in your attic may be sudden, the damage caused by these critters is a long-term issue, so it’s almost always excluded. This type of coverage may be included in some policies or can be added by a rider. Ask your agent to know your options.
Whether your heating and cooling system is covered depends on what caused it to be damaged. Normal wear and tear typically is excluded, unless you purchase a separate mechanical breakdown endorsement (similar to a rider, or a home warranty). But if your HVAC unit is damaged as a result of another incident such as a garage fire, you should be covered.
Landscaping is considered part of your land and is therefore excluded by most homeowners policies. Endorsements offering this coverage are usually available. On the other hand, fences, detached garages and sheds are structures, and are usually covered — including any contents. Be sure to let your agent know any time you upgrade a structure, such as turning an old shed into a fancy she-shed, because you may need extra coverage.
Home insurance indeed is a complex product, and many risks may not be automatically covered. This is why it’s vital to work with a knowledgeable, trusted agent who can tailor your coverage to match your specific needs.
– Written by Matt Forrest, last updated in December 2022.