▶ Managing excluded property losses
▶ Protecting yourself from homeowner’s liability exclusions
▶ Making sense of the new mold coverage restrictions
▶ Understanding the National Flood Insurance Program
Homeowner’s insurance policies are extremely comprehensive in coverage.
They cover the majority of property and liability claims related to
residences (see Chapter 9), but they do have limits. Even the broadest homeowner’s
property coverage — special perils coverage — has a handful of
excluded causes of loss, including:
✓ Any kind of earth movement, such as earthquake, tremors, landslides,
mudflows, and sinking or shifting
✓ Water that enters the house at or below ground level, such as a flood,
runoff from heavy rains, sewer backup, and foundation seepage
✓ Ordinance or law requirements that either increase the cost of repairs
or require demolition
✓ War or nuclear risks of any kind
✓ Other causes of loss for which no coverage is available, including wear
and tear, neglect, insects, intentional damage, failure to protect the
property after a loss (see the nearby sidebar, “Protect your property,
protect your claims”), and off-premises power failures
I address in this chapter only the exclusions that you can actually do something
about or for which optional coverage is available. I don’t address here
exclusions covered elsewhere in this book like boats, recreational vehicles,
and trailers (which I cover in Chapter 7).
Protect your property, protect your claims
An insurance policy is a binding legal contract. In order to be a valid contract, both parties
agree to do certain things for the other. The obvious obligations are for you to pay all premiums
by the due date and for your insurer to pay your covered claims when they occur.
But your obligations don’t end with the premium payment. You can find your obligations (called conditions) in the back of every insurance policy, and you’re required to comply with each of them. If you don’t, you jeopardize your claim settlement if your noncompliance affects the claim.
One condition that most people are unaware of is the obligation to protect the property from further loss once a claim has occurred. If you don’t, any resulting damage may not be covered. Here are some examples:
✓ Not acting to put a tarp over the hole in your roof caused by a storm, which leads to an additional $20,000 interior water damage
✓ Not moving high-value items to a safe place after a fire on one side of the house has made easy access to the interior possible, leading to a theft of six original paintings valued at $52,000
✓ Not changing the locks on your house after someone stole your purse with your keys inside, leading to a major burglary of $35,000 of stereos, TVs, and other property after the burglar entered using the stolen
Following any kind of property claim, you must take immediate, reasonable action to prevent further damage to your property, or you likely won’t be covered for the additional damage. If you incur expenses in the process, the insurance company should always reimburse you, as long as you promptly notify them, the costs are reasonable, and you get their approval.