The homeowners insurance policy is not designed to cover all types of losses, mostly because the policy would be unaffordable for consumers if it actually covered any type of claim that occurred.
Instead, the standard homeowners policy provides coverage for claims that nearly all homeowners are likely to experience. Claims such as:
- Fire or lightning
- Windstorm or hail
- Explosion (think your hot water heater or furnace)
- Smoke damage
- Vandalism
- Accidental discharge or overflow of water or steam (again, your hot water heater, plumbing or air conditioning equipment)
But, there are certain types of claims that aren’t covered.
Exclusions
The insurance industry uses the term ‘exclusion’ to identify the types of claims your homeowners policy will NOT cover. Examples of several exclusions include:
- Earthquake
- Landslide
- Flood
- War
- Nuclear hazards
- Intentional losses
Why do exclusions exist?
For one, there are certain types of claims insurance companies have no interest in providing coverage for because if they were to occur, the damages would be too devastating. War and nuclear hazards would fall into this category.
Second, insurance companies want their insureds (you) to take reasonably good care of your property, and at the very least, refrain from doing anything to purposely damage your own property. This is the reason for the ‘intentional losses’ exclusion
And third, some types of claims are more likely to impact certain areas of the country. For example, if you live on the coast or near a body of water, you’re more likely to suffer from a flood compared to someone living at the highest point in Ohio.
Those in California are very likely interested in earthquake insurance; probably more so than someone nowhere near a fault line.
What’s right for you?
Like most all insurance questions, the answer depends on your comfort level. You don’t have to live near a body of water to experience a flood. Just because you’re not on a fault line doesn’t mean you won’t suffer damages because of an earthquake.
But realistically, you’re not likely to purchase coverage for these types of claims unless you do (live near a body of water, or close to a fault line).
In fact, most homeowners choose to gamble on Mother Nature. Perhaps they do so because they aren’t aware that their homeowners policy doesn’t cover damages caused by a flood or earthquake.
Or perhaps they prefer to forego coverage because of the price of flood and earthquake policies. Or maybe they just take their chances and assume that these types of claims won’t impact them.
But the results can be devastating.
In Ohio, flood losses account for more damage compared to those caused by an earthquake. So it stands to reason that flood policies start at a few hundred dollars a year, and can be well over $1,000 depending on the coverage amount.
On the other hand, coverage for an earthquake can usually be added to your homeowners policy for less than $200 a year (depending on the value of your house).
Tip. Whatever their reasons, make sure you are comfortable with the risks you are assuming. Insurance is available for flooding and earthquakes. Ask your agent to find out how much these policies would cost you.
If you’d like to learn more, contact one of our Licensed Advisors . We’re here to help.