Five Things Your Home Owner’s Insurance Doesn’t Cover

When a faulty drain pipe allowed rain water to seep in to our daylight basement, soak the brand new carpet and ruin the baseboards, we expected our home owner’s insurance to cover the damage. But because the water came from outside (as opposed to an indoor plumbing failure), we were on our own.

So that you aren’t taken by surprise, here are five things most home owner’s insurance (also called hazard insurance) does not cover:

  1. Sewer back-up.
    As with outside-in water damage, the standard homeowner’s policy doesn’t cover a clogged sewer or backed-up sump pump.
  2. Mold.
    The companion to moisture is mold. Spores can embed in air ducts and behind drywall. If a home renovation project reveals a mold issue, your standard insurance policy won’t help.
  3. Termites.
    This is why mortgage lenders require a termite inspection before closing on the loan, if you live in an area prone to these pests. Once you are in the house, keep a watch for signs of wood destroying pests and act swiftly if needed.
  4. Trampolines, tree houses, and swimming pools.
    104,691 people a made trip to the ER last year due to injuries associated with trampolines. (The Consumer Product Safety Commission) Speaking of backyard hazards, your liability coverage might not be sufficient for swimming pool damage either. In addition, if your pool freezes and causes structural damage, your insurance won’t help.
  5. Earthquakes.
    Unless you have special earthquake insurance, earthquake damage is not covered. Should you add earthquake insurance to your policy? That is a personal judgment call. Personally, I figure that if an earthquake happens, my address won’t be the only one hit — it will affect the entire area; thus, state and federal funds will become available. Knowing how insurance companies like to fight, I’d rather not take a chance on prolonging help. But please, speak to your insurance agent to find out what makes the most sense for your home and neighborhood.

Good to Know

If you have a mortgage, hazard insurance is required. Once you pay off your mortgage, then you are responsible for continuing coverage.

If your down payment is 20% or more, you may choose to pay hazard insurance (and property taxes) outside of the loan if desired. However, there might be a fee of .125 to .25 percent of the loan amount if the lender risks trusting you to keep up payments.

If you have a mortgage and opt to pay insurance outside of the loan and then let your payments and policy lapse, the lender will find out. Then the lender will select and instate an insurance policy and bill you for it with your next mortgage statement. (This will likely be a more expensive policy than the one you had before.)

When my own home suffered water damage, we had sufficient savings to cover the clean-up and repair. Be sure that you, too, have a financial safety net to protect you from unforeseen hazards.

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