Your mortgage company typically requires you to purchase homeowners insurance, and that is strongly advised even if you pay off your mortgage or buy your home for all cash. It is a safety net if the unexpected happens to your home, your belongings or visitors to your property.
What standard homeowners insurance policies cover
A standard homeowners insurance policy provides a significant level of protection. If your home is destroyed or damaged because of a fire, windstorm, lightning strike or other disaster, your insurance will pay to help rebuild or repair your home.
If someone breaks into your home and steals or damages your personal property, your insurance will help cover the costs of replacing these items. And if someone is injured on your property and sues you for medical costs? Your policy will help cover your legal bills or help pay for the injured person’s medical care.
Your policy will even help cover the costs of hotel stays and meals if your home is damaged and you can’t live in it while it is being repaired.
Homeowners insurance provides a significant amount of protection. But not even the best homeowners’ insurance policy ‘covers everything.
Keep in mind that there are exceptions, and standard policies usually don’t cover these five common situations:
Flooding. Your insurance policy won’t cover flood damage caused by heavy rains or a nearby waterway overflowing. For protection against flooding, you’ll need to purchase flood insurance issued by the National Flood Insurance Program administered by the Federal Emergency Management Agency. Homeowners insurance policies, though, will cover water damage caused by backed-up sewer lines or a malfunctioning sump pump. They’ll also cover water damage from a burst pipe if your insurer determines that the problem wasn’t caused by a lack of maintenance on your part.
Termite and other insect damage. Your homeowners insurance policy won’t cover damage caused by insects such as termites or ants. Policies also don’t cover damage caused by other pests such as mice. Why? Insurers consider this a maintenance issue. If you notice signs of insect or pest damage, you should hire exterminators to take care of the issue before it develops into a more serious one.
Earthquakes. Your policy won’t cover damage caused by an earthquake. If you live in an area prone to these natural disasters, you can purchase a separate earthquake policy that will pay if your home is damaged or destroyed by an earthquake.
Sinkholes. Sinkholes fall into the same category as earthquakes. Standard homeowners insurance policies don’t cover damage caused by a sinkhole. Again, if you live in an area that is prone to sinkholes, you can purchase a separate sinkhole policy for protection.
Home businesses. If you operate a business from your home and someone is injured while visiting that business, your homeowners insurance policy won’t cover any of that person’s medical bills. It also won’t cover your legal bills if that person sues you. For coverage of these scenarios, you can purchase a home-based business insurance policy to provide this type of protection.
As you can see, it’s important to understand the limitations of your standard homeowners policy. That way, you can add extra coverage to provide the best protection for your home.
