With over 60% of Americans owning a house and perceiving homeownership as a life goal, the demand for homeowners insurance is always high. At least 85% of homeowners have basic coverage, paying an annual average of $1,500 for it.
But some homeowners don’t know that their insurance is not all-encompassing. While covering your home and its contents, as well as providing liability coverage, basic policies cannot save you from all possible perils. Landslides, earthquakes, sinkholes, and neglect are usually not covered and therefore may lead to substantial financial losses should the unexpected happen.
Homeowners insurance – also known as an HO-3 policy – is not all-encompassing, but it does cover a lot. See the table below.
|Coverage Type||What Is Included|
|Dwelling (Coverage A)||The structure of the building and its roof, as well as heating, plumbing, and electrical systems.
Excluded: exterior structures
|Other Structures (Coverage B)||Exterior structures of your home (the parts that sit on a separate foundation): garages, fences, sheds, and bards.|
|Personal Property||Your personal possessions: appliances, furniture, etc.
Excluded: costly items, such as jewelry, family relics, or works of art
|Liability||Injury (dog bites, intoxication, home accidents, falling trees, etc.) and damage to other people’s property caused by you (the policyholder) and the members of your household.|
|Guest Medical Protection||Medical expenses sustained by guests injured on your property.|
|Loss of Use (Additional Living Expenses)||Lodging expenses while your house is uninhabitable due to the damage or if you cannot return to the property due to wildlife, storm, or other weather event.|
What is covered and what is not covered by your policy depends, first of all, on the type of policy and the state you’re in. However, most standard homeowners insurance policies exclude the following:
A standard homeowners policy does not cover earthquakes, landslides, and water damage unless the state is located in a flood-prone, landslide-prone, or earthquake-prone zone. For example, in California, earthquakes are usually covered by a standard homeowners policy.
Earthquakes, water damage, landslides, and sinkholes can be covered with special endorsements to your basic homeowners insurance policy. Additional coverage will increase your premium.
Damage from termites is usually not covered by a home insurance policy, as it is believed that it can be prevented with maintenance like regular checking for changes in wooden areas, avoiding the accumulation of moisture in the foundation, and maintaining an 18-inch minimum between the wood portions and the soil.
You can include termite coverage in your homeowners insurance policy as an endorsement.
Mold, rust, rot, termite damage, and most other misfortunes usually come from maintenance issues and neglect. But, of course, no homeowners plan, regardless of whether it’s basic or extended, will cover neglect.
Homeowners insurance is not required in the United States. As for the reasonable minimum, it is recommended to have:
Note that about 60% of all homes in the United States are underinsured. Try to determine the proper balance between your budget and risk tolerance so you can get peace of mind and adequate coverage.
Oleksandr is an expert in deep research. He covers various insurance topics across verticals, adopting to every local law.