Homeowner's Coverage Gaps

The typical homeowner's insurance contract is very comprehensive and is designed to protect the homeowner in the event of damage to the home. It is a far cry from the fire policies available just a few years back. Even with all of the improvements, there are still some circumstances where you can suffer a severe financial setback.

8 "Gaps" to watch for in a typical homeowner's contract.

Ordinance and Law" Expense

If you own an older home, and a large loss were to occur, your local municipality would require that you bring the wiring, plumbing, etc. "up to code". These additional costs are not covered under a typical homeowner's policy. A good example is damage to a roof. Let's say you have a home with three layers of roofing material. This is the maximum number of layers that most municipalities allow. Let's say that your roof is damaged by hail and needs to be replaced. Under a typical homeowner's policy, the cost to re-proof the home is covered. However, the cost to tear off all of the three layers of roofing material, (as required by local code) , is NOT covered under a typical homeowner's policy. The cost to tear off the old roof is usually greater than the cost to re-roof. Ordinance and Law coverage is included with some companies automatically and is an option with other companies. Some insurance companies doe not offer the coverage at all.

Back up of Sewers and Drains.

This coverage is of great concern if you have a finished basement or store a lot of contents in your basement. The typical homeowner's policy does not automatically provide this coverage. Most insurance companies will add this coverage by endorsement, but will limit the amount of money they will pay. I have personally seen these losses exceed $15,000.00. It is extremely important to make sure that you not only have the coverage, but that the limit is adequate. Also, make sure that the coverage applies to the building AND contents. Some insurance companies limit the coverage to only the appliances, (washer drier, furnace, etc.) located in the basement. Damage to the finished basement and contents is not covered!

Flood Insurance.

Flood is NEVER covered under a homeowner's policy. Coverage must be purchased separately and is underwritten by the Federal Government. Sewer back-up losses are never covered by a Flood policy. Give Hahn Agency or your local municipality a call to see if you are "at risk".

Special Limits of Liability

Every homeowner's insurance policy limits coverage for certain classes of property. The obvious classes are jewelry, furs, and silverware. The not-so-obvious are business property, trailers, recreational vehicles, grave markers, etc. There are standard limits, but most insurance companies vary widely on the limits they use. Please review your policy carefully with respect to these special limits.

Limit Adequacy

Even though the dwelling coverage is paid on a replacement cost basis, the insurance company will not pay more than the limit listed on the policy. A way to avoid an unforeseen shortfall in coverage is to add "guaranteed" replacement cost to the dwelling coverage. With guaranteed replacement cost, the insurance company will rebuild your home even if the cost exceeds the limit on your policy. Of course, there are certain conditions to be met such as having an insurable replacement cost appraisal done on your home, and informing the insurance company of any significant changes to the home once the endorsement is added. You may recall the fires in Oakland California a few years back. Most of the homes destroyed in that fire were vastly underinsured. To obtain a FREE insurable replacement cost appraisal of YOUR home please go to the Replacement Cost Estimator.

Other Structures - Limit Adequacy

The other structures coverage is usually limited to 10% of the dwelling limit. In most cases, this is more than adequate. However, if you have buildings on your premises of unusual or large design, the 10% limit may not be adequate. Please remember that other structures includes fencing. If you have a coach house or garage apartment and rent them out, the other structures coverage does not apply. The other structures limit can be increased by endorsement.

Personal Liability Coverage - Income Property

If you rent out a coach house or garage/basement apartment, your personal liability coverage will not respond to premises liability arising out of the rental property unless you have specifically added the coverage to your liability policy. The cost is not great, but the exposure can be.

Personal Liability Coverage - Personal Injury

Personal Injury includes Libel & Slander, False Arrest, and Defamation of Character amongst others. This coverage must be added to most homeowner's policies for an additional premium.

Request a quote If you would like a competitive insurance quotation and would like to avoid the common coverage gaps in a typical homeowner's policy.

Homeowners Insurance Coverage Gaps.

8 "Gaps" to watch for in a typical homeowner's contract.