Overlooked Home Insurance Facts
That Could Save You Money
Standard home insurance provides coverage for structures, belongings, and liability claims. Riders (also called endorsements) can add or amend protection. Here's what to know to make sure you get the best policy.
Are You Insured for Cash Value or Replacement Cost?
Replacement cost provides better coverage because it insures you for what it would take to repair or replace your structure or belongings with something new today. Cash value is based on cost minus depreciation.
You usually have the option to add coverage that increases the replacement cost amount by a certain percentage, i.e., 25%, in case materials or labor are more expensive than anticipated.
Is Your Policy "Named Perils" or "Open Perils"?
Most single-family home policies are "HO-3", which is an "open perils" policy. This means the structure is covered for any peril that is not specifically excluded in the contract. (Belongings are covered only for named perils.)
HO-1 and HO-2 policies are "named perils" policies for both the structure and belongings, meaning that only perils specifically listed in the policy are covered.
(There are more HO definitions at the end of this article.)
Do You Have an Umbrella Policy?
An umbrella policy covers you for liability beyond the limits of your home or auto insurance policies, usually up to at least $1 million.
While no one wants to think about being sued, an umbrella policy can be a lifesaver if a covered event results in a very expensive legal situation. (For example, if someone is badly hurt on your property, or the policyholder causes an accident that creates enormous damage.)
Tip: Insurers typically require you to have home and/or auto insurance before they offer an umbrella policy.
Be Careful When Inquiring About a Potential Claim
Did you know that simply calling your insurance company to find out if a certain event is covered could count against you as a claim in your history?
Not all insurers handle questions this way, but to stay on the safe side, talk to your personal agent or broker rather than the main insurance company. Regardless of whom you speak with, make it clear that you're asking "for informational purposes only" and not calling to file a claim.
Insurers Want Home Businesses to Be Disclosed
The last thing any homeowner wants is to file a claim and then find out their coverage was invalidated by an undisclosed home business. Getting adequate coverage could be as simple as adding a home business rider to the main policy.
Tip: Any home business that involves high-value items, increased fire hazard, or foot traffic from clients will probably make things more complicated.
When Does Your Home Become a "Vacant Home?"
Most home insurance policies restrict or exclude coverage for vacant or unoccupied (still furnished) homes, so it's helpful to know how long you can be away before your property falls into either of those categories. (Most companies go by 30 days, some by 60.)
Before leaving your home for 30 days or more, check your coverage to see if you may need a temporary rider to your current policy or a separate vacant home policy.
Floods and Earthquakes Aren't Covered
Coverage for earthquakes and flooding (including storm surges) requires separate policies. Here are some helpful things to know.
Flood insurance: This is offered by the NFIP (National Flood Insurance Program), but the coverage limit is $250,000. Private insurers sometimes offer better coverage for reasonable rates, so it's worth checking around.
Earthquake insurance: Typically has high deductibles in the range of 10% to 20% of the coverage limit. Depending on the area and risk level, some homeowners opt for investing money in earthquake retrofitting instead.
Dog Bite Claims Are Big Trouble (and Big $$)
You don't have to look very long at online insurance discussion boards to find people saying their home insurance was canceled after a dog bite claim.
A dog bite claim doesn't mean an automatic cancellation, but usually results in at least a premium increase or an exclusion of coverage for that animal.
Tip: It's helpful for dog owners to know if their insurance liability coverage includes off-premises dog bites. (This varies by provider.)
Which Dog Breeds Are Hardest to Insure?
Ten of the dog breeds most likely to be refused by home insurance companies are:
- Doberman Pinscher
- Pit Bull
- Rottweiler
- Chow Chow
- Presa Canario
- Akita
- German Shepherd
- Husky
- Great Dane
- Cane Corso
Any wolf or wolf hybrid is usually a "no" as well.
What Kind of Rental Home Insurance Is Best?
Rental property owners typically have either a Landlord Policy or a Dwelling Fire Policy.
Landlord Policy: This is often a standard homeowner's policy with a rider providing for the conditions of a rental situation.
Dwelling Fire Policy: These are usually less expensive and come in several important variations (DP1, 2, or 3).
DP3 is the strongest DP option because it's an open perils policy that uses replacement cost value. Liability protection and loss of rental income are often not included by default, but can usually be added via a rider.
(The link is not intended to recommend any specific provider, it's simply a clear explanation.)
Are Extreme Natural Events Covered?
Standard insurance policies have historically covered damage from unusual events such as hurricanes and wildfire, but now more companies are excluding coverage or canceling policies in disaster-prone areas.
In those situations a rider to the primary policy might add the protection needed, or the homeowner may be able to take out a separate policy.
What Else Is Often Not Covered?
Uncovered perils vary by company but frequently include the following:
Damage caused by neglect or lack of upkeep. This includes many issues involving rodents, insects, long term water intrusion, and mold.
Liability related to items such as trampolines, swimming pools, hot tubs, and playhouses may not be covered. It's important to talk to your insurance agent about these and any similar items.
Most states require homeowners to make an "attractive nuisance" (such as a playhouse or a freezer stored outside) reasonably inaccessible to trespassing children. Insurance companies usually have similar requirements as a condition of liability coverage for those types of items.
Damage from fallen trees is typically covered by the policy of the person who incurs the damage, regardless of who owns the tree. However, in rare cases claims have been contested when the insurance company deemed that the tree was diseased and should have been taken down beforehand.
More Homeowner Policy Lingo:
HO-4 policies are for renters. They cover belongings and liability.
HO-6 policies are for condo owners and cover belongings, liability, and interior structures that can be loosely described as "from the walls in".
HO-7 policies are for manufactured and mobile homes, modular homes, and RVs.
Less common are HO-5 policies (which are like HO3 policies except that they cover belongings using an open perils policy), and HO-8 policies, which are often used for older or historic homes.
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