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6 times your home insurance may come up short


Homeowners insurance usually helps you pick up the pieces after a theft or disaster. But not every loss within your home is covered, says Lynne McChristian, Florida representative for the Insurance Information Institute (III).

"Homeowner insurance policies may differ on what is covered and what is not," she says. "So, it's always important for people to read their insurance policy."

Following are six situations where your homeowners insurance may not pick up the full tab for your damage.


1. Flood.


A homeowners insurance policy protects you from sudden water damage events, such as a burst washing machine hose, or an automatic fire-protection sprinkler system gone haywire.

However, home insurance won’t protect you against damage resulting from a gradually dripping pipe that you haven’t fixed for months, McChristian says.

Homeowners insurance also doesn't cover damage associated with floods. Floods can occur in every region of the United States, according to the Federal Emergency Management Agency. Ninety percent of all natural disasters in the United States involve some type of flooding, including inland flooding, flash floods and seasonal storms.

How do you know if an event qualifies as a "flood" that is protected by flood insurance?

"A homeowners policy generally covers water damage from sudden events that happen inside your home, affecting only you," McChristian says. By contrast, flood insurance kicks in when water covers 2 acres or more, or affects two or more properties.


2. Possessions that exceed coverage value.


Some people collect coins or great works of art. Others own expensive jewelry or pricey antiques. Generally, your home insurance policy provides coverage for your contents equivalent to 50 percent to 70 percent of the amount of insurance you have on the dwelling, according to III.

So, insuring your home for $100,000 would provide you with $50,000 to $70,000 in coverage for your valuables.

That may sound like a lot. But what if you have art worth $100,000? In addition, other limits and exclusions may apply. For example, a home insurance policy typically offers just $1,000 to $1,500 of coverage for theft of jewelry, according to III.

Loretta Worters, vice president of the Insurance Information Institute, notes that homeowners coverage typically doesn’t cover jewelry loss that results from things such as a fire. Jewelry that disappears mysteriously also wouldn’t be covered. By contrast, floaters -- also known as "riders" or "endorsements" -- provide you with coverage of individual, named items that stretches beyond your insurance policy's limits.

Wondering how much insurance you will need? "The best way to estimate the value of your items is to get them professionally appraised,” says Pete Moraga, spokesman for the Insurance Information Network of California.


3. Mold.


Too much moisture in a home can trigger mold growth, which might be covered by your home insurance policy.

However, "standard homeowners policies don't cover water damage caused by maintenance problems," Worters says.

Examples of such maintenance issues include:

  • Continuous or repeated water seepage or leakage.
  • Humidity or condensation problems.
  • Landscaping or drainage problems.

Talk to your agent to see what mold events would be covered, Worters says. Mold infestation that results from other sources typically is not covered by homeowners insurance.


4. Earthquakes and sinkholes.


Most home insurance policies don't cover damage associated with "earth movement," such as sinkholes and earthquakes, according to the III.

Sinkholes are giant openings in the earth. They form as a result of groundwater that has dissolved underlying bedrock, which eventually causes the ground surface to collapse.

According to the U.S. Geological Survey, sinkhole damage occurs mainly in:

  • Alabama.
  • Florida.
  • Kentucky.
  • Missouri.
  • Pennsylvania.
  • Tennessee.
  • Texas.

Florida is the only state that requires insurers to provide sinkhole coverage as part of a standard homeowners policy. In Tennessee, insurers must offer optional sinkhole coverage. In other states, contact your insurer to find out if the coverage is available.

According to III, all 50 states have experienced damage related to quakes.  Earthquake insurance is available as a separate stand-alone policy, or as an endorsement to your homeowners insurance policy.

"Without earthquake coverage, any damage caused by an earthquake would not be covered by traditional homeowners insurance," Moraga says.


5. Sewer backup.


Sewer lines across America are getting old. In fact, some have celebrated their 100th birthday without being replaced, according to the American Society of Civil Engineers.

Aging lines can lead to sewage backup. Sudden rainstorms and blockages from tree roots also can cause sewage to backup. As the sewage builds up, it can eventually spew into your home, damaging furniture, the electrical system, floors and walls. 

Many people don’t realize they’re responsible for the maintenance and repair of the sewer line on their property, McChristian says. Homeowners typically are responsible for the pipeline -- known as a "sewer lateral" -- between their home and the city sanitary sewer main.

"Protection from sewer backup isn't covered under a typical home insurance policy, or by flood insurance," McChristian says.

You can purchase coverage for sewer backup as an endorsement to your home insurance policy, which typically costs $40 to $50 annually.


6. Structures and equipment used for business.


Millions of entrepreneurial Americans have started businesses in their homes. However, don't assume a homeowners policy will cover all costs of lost or damaged items you use in your business, says Lori Conarton, spokeswoman for the Insurance Institute of Michigan.

"Generally, home policies limit coverage to about $2,500 to replace damaged or stolen business equipment," she says.

If you own a home-based business, consider an endorsement to your policy to increase the limits. For about $25 annually, you can add an additional $2,500 in business equipment coverage, according to III.

You may also need additional liability coverage if your home-based business involves customers or clients who visit your home. If you have relatively few visitors, you may be able to purchase an endorsement on your homeowners policy that offers additional liability coverage for business-related activities.

The cost of such policies varies considerably from insurer to insurer, according to III.

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