7 Surprising Facts About Homeowners Insurance
Homeowners insurance can make you financially whole after a natural disaster or other loss that occurs on your property. It covers losses to your own home, as well as your liability for any injuries or property damage you cause to others.
But there are a few things about this coverage that may surprise you — and knowing this information can benefit you in many different ways.
Following are seven overlooked facts you should know about your homeowners policy:
1. You can reopen a claim after you receive a check from an insurance company
If your home is damaged by a fire or natural disaster, the homeowners insurance company will send an insurance adjuster to assess the loss.
Eventually, you will receive a check to cover the cost of your claim. But what happens if you later discover damage that you missed initially?
“You may be able to reopen the claim and file for an additional amount,” says Loretta Worters, a vice president at the nonprofit Insurance Information Institute.
Typically, claims for damage must be filed within one year of the date of the loss. However, rules differ by state. Worters suggests contacting your state department of insurance for more information.
2. Homes near fire departments and fire hydrants cost less to insure
To save money, find a home located in a community with a fire department that is deemed “highly rated.” You may pay lower insurance premiums if you live in such a community.
ISO — a company that provides advisory services and information to many property/casualty insurers — rates fire departments on a scale from 1 to 10, with 1 being the best rating. Some insurance companies use these rankings when setting insurance rates.
Worters says many factors determine a fire department’s rating. “(The rating is) determined by such factors as whether it’s a volunteer or professional fire department, and the type and extent of training provided to fire company personnel,” she says.
Other factors include:
- How effectively the department receives and dispatches fire
- The sufficiency of the community’s water supply.
You also may pay less if there is a fire hydrant near the home — typically within 1,000 feet, Worters says.
3. An insurer cannot cancel your homeowners policy without good reason
Homeowners insurance companies cannot cancel a homeowner insurance policy that has been active for more than 60 days except in very specific circumstances, including when the insured party:
- Fails to pay the premium.
- Commits fraud.
- Lies or makes other misrepresentations on the original insurance application.
- Abandons the property or allows it to fall into disrepair.
However, once the policy term is up — usually, at the one-year anniversary — the insurance company can decide not to renew the policy.
Rules vary by state, but the insurer likely will have to give you advance warning of a coming nonrenewal, says Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “Most states require at least 30 days’ written notice,” she says.
Walker adds that many states also require an insurance company to tell you why it isn’t renewing the policy.
4. Your dog may make it harder to buy comprehensive homeowners insurance
Most homeowners policies provide coverage if your dog bites someone. The liability portion of your policy typically will protect you for up to $300,000 in damages.
However, some insurers refuse to sell to dog owners, or owners of specific breeds, such as pit bulls and Rottweilers. Others may limit the type of coverage you can purchase.
Owners of dogs that have a history of biting are especially likely to face these restrictions. In such instances, your insurer may:
- Decide not to renew your policy.
- Charge you a higher premium.
- Exclude any damages related to the dog from coverage.
Rules for how insurers may treat dogs vary by state. For example, in Michigan, insurers can’t exclude coverage based on the breed, says Lori Conarton, spokeswoman for the Insurance Institute of Michigan.
“However, pet owners may have their insurance canceled or non-renewed if the animal has bitten a person or attacked another animal, and has caused a liability claim to be paid under the homeowner’s insurance policy,” she says.
5. Your home remodeling project may not be covered
Planning to add a new room or other structure to your house? The best time to call your agent is before you begin a renovation or addition.
“Ask if you will need to update your homeowners insurance and whether you need other types of insurance to protect you financially during the project,” Worters says.
If you fail to do so and the project is damaged — whether before or after it is finished — you may not be covered.
In addition, ask all contractors and subcontractors to provide a copy of their own insurance policies, including both the commercial business/general liability policy and the workers’ compensation policy.
If the contractor doesn’t have adequate coverage, you could be sued if a worker is hurt on your property. In that case, you should consider hiring a different contractor, Worters says.
6. You can buy valuable water-damage coverage for $50
Between 2008 and 2012, water damage — including damage caused by frozen water, such as burst pipes — was the second most commonly filed homeowners insurance claim, according to the III.
Most people know flooding is not covered unless you purchase a separate policy.
However, fewer homeowners may realize that many policies also don’t cover homes for sewer and drain backups.
“Imagine the mess and expense caused by a sewer backup, and paying for that out of pocket,” Walker says.
Fortunately, you often can purchase a separate rider that will provide you with this coverage for as little as $50 annually, according to the III. Talk to your agent to find out more.
7. Your lender may limit the size of your insurance deductible
Many homeowners try to save money on premiums by increasing the size of their deductible. For example, raising your deductible from $500 to $1,000 can net you savings of up to 25 percent, according to III. You could save even more by getting a higher deductible – some insurers, such as MetLife, offer flat dollar deductibles up to $10,000.
However, your lender may limit the size of your deductible, typically to $1,200 or less.
“They may limit the size of your deductible because they want to make sure you are able to pay the deductible in order to get repairs done on the property,” Worters says.