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Notable Omissions/Limitations in Your Home Insurance Policy

Do you know what types of losses your home insurance policy will cover? Perhaps more important, do you know what types of commonly occurring losses it will not cover?

Knowing the limitations in your policy is the first step to finding the fix. Following is a list of commonly occurring events or exposures that can cause significant financial damage to you and your family. What do they all have in common? Coverage for them is either limited or excluded under a typical home insurance policy.

Flood
According to the Federal Emergency Management Agency, floods are the most pervasive and damaging cause of loss in the U.S. annually. Floods are also responsible for more deaths than any other naturally occurring event in the U.S., and they happen in all 50 states. Missouri sustained major flood damage in 2011 along the Missouri River and in SE Missouri near the Mississippi river.

FEMA designates areas as special flood hazards areas or “flood zones” on rate maps that are revised on an occasional basis. FEMA is quick to note that just over 30% of properties that sustain flood damage in the U.S. are not located in one of these zones.

You do not have to live in a flood zone to purchase flood insurance.  Prime Insurance can help.  We offer flood insurance through the Hartford and Travelers.

Earthquake
Myth—The western U.S. is the only region of the country that needs to worry about earthquake damage.

Fact—According to the Insurance Information Institute (I.I.I.), earthquakes have occurred in 39 states, and damage resulting from them has occurred in all 50 states since 1900. The I.I.I. explains that some specific types of damage that may result from earth movement are covered by a typical homeowners insurance policy. Examples include fire, explosion and water damage. This is important because it’s common for the earth movement to rupture gas and water lines. However, it’s noteworthy that structural damage caused by the shaking of the ground is not covered by a home insurance policy. Homeowners in Liberty and Kansas City felt the 2011 Oklahoma earthquake.

Only an earthquake insurance policy will cover earthquake damage. Earthquake coverage is readily available in the Kansas City area and throughout Kansas.  Certain parts of Missouri - for example, near St. Louis or in southeastern Missouri, it can be more difficult to obtain coverage.  An earthquake coverage endorsement often times can have a $10,000 or $15,000 deductible.

Ordinance and Law
Would the repair of your home be susceptible to increased costs resulting from having to comply with a building ordinance? As communities become more aware of potential property damage, stringent building codes are approved that must be adhered to for homes that are built new or rebuilt after damage. Compliance with such codes may significantly increase the cost to rebuild your home. For example, many regions of the country are adopting new codes to ensure homes built there use less water and are more energy-efficient. Installing the necessary materials and appliances could translate into more dollars for the repair.

The good news is that most home insurance companies will cover these increased costs due to ordinance or law. However, many such policies limit the available dollars to no more than 10% of the value of the dwelling. More coverage is typically available and should be considered if your community has adopted more stringent codes since your home was originally built.

Business from Home
As harsh economic conditions continue to hinder employers across the U.S., many former employees have decided to go into business on their own. Others may be employed with a firm but choose to work from home. Regardless, operating a business activity from home can create coverage problems under a typical home insurance policy.

First, a home insurance policy contains limited coverage for property used in the business. Many policies limit damage to such property, which may include items like equipment, inventory and computers, to a specific dollar amount, such as $2,500. The amount typically decreases when the business property is damaged while away from the residence.

The second major issue with a home-based business is liability coverage. With few exceptions, liability coverage for the business is not covered. Excluded injuries may include those to a customer or salesperson that occur in the residence or bodily injury suffered by someone using your home-based business’s product. Property damage caused by your home-based business’s operations, such as a side-job that causes structural damage to a customer’s home, are not covered by home insurance. Further, the home insurance policy does not cover professional liability claims. Such claims may include errors or omissions made by you in your performance as a professional.

Insurance for the home-based business may be available as an endorsement to the existing home insurance policy. For some home-based businesses, separate commercial insurance may be a better choice.

These and other potentially damaging issues must be brought into the forefront of the conversation with your insurance agent. Unfortunately, many agents and insurance buyers skimp on the details, looking to secure insurance using the path of least resistance. When this happens, exposures like these go unnoticed and often result in large out-of-pocket expenses to you. A Trusted Choice® independent insurance agent like those at Prime Insurance will spend time with you, helping you to identify exposures like these and creating a policy that truly fits your family’s needs. Call today.

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