As a homeowner, being familiar with your homeowners insurance policy and what it covers can prevent costly out-of-pocket damages. If you have no idea, you could be setting yourself up for a costly surprise if something unexpected happens to your home and you need to file a claim for damages.
Homeowners insurance is designed to protect you and your home. That’s why, the more you know about what’s in your policy, the more prepared you’ll be to make the necessary changes or upgrades to keep from being underinsured. While homeowners can make several mistakes when purchasing insurance, one of the biggest is not having flood insurance – they mistakenly think their homeowners policy already covers that kind of damage.
As a rule, the cost of the policy almost never includes any flood insurance coverage, which typically must be purchased from the insurer for an additional charge, or separately from the National Flood Insurance Program (NFIP). The NFIP generally limits coverage to $250,000, and can be quite expensive, especially if your home is located near or in what is considered a traditional flood plain…and, therefore, a high risk of flooding area.
Many homes are located in areas where Mother Nature hasn’t subjected them to flooding for many years and, since flood insurance is not mandated by law unless located in a federally designated flood plain, their owners don’t consider it a necessity. Unfortunately, all it takes is a rare storm or sudden stretch of severe weather, including periods of heavy downpours, and flooding can occur almost anywhere.
One only needs to look at New Jersey and nearby states where many homeowners didn’t feel flood insurance was something they needed. But, when Hurricane Sandy struck, tens of thousands of homes were damaged or destroyed. While those living along the Atlantic Coast commonly had coverage, others located further inland had no flood protection and were caught completely by surprise by the flooding.
Another costly mistake is the belief that homeowners insurance covers sewage backups and mold damage. Mold can form and get into a home in many ways, from internal leaks, external water seepage, and moisture buildup over time. Unfortunately, not all homeowners insurance policies pay for mold damage or sewage backups. You should check your own policy as a safeguard against finding out the hard way that you’re not covered for either one.
The good news is, although sewage backups are often excluded from many policies, a special endorsement can be purchased to protect you against them. The expense of cleaning up and repairing the damage caused by a sewage mishap can be substantial, but since the additional coverage and protection costs around $30 more, you may want to reconsider and get the endorsement.
Furthermore, review your deductible, which can vary based on the cause and the type of damage to your home. As an example, damage or destruction as a result of fire, windstorm, or hurricane can apply a deductible calculated by a percentage of the overall coverage limit. If such is the case with the policy, following the $250,000 limit at 15%, the deductible or out-of-pocket cost would be nearly $40,000. Talk about a costly surprise.
So, be a homeowner who knows-it-all. Avoid a costly surprise by knowing what’s in your insurance policy.
You may also want to make sure you’re getting the best rate on your homeowners insurance. Why not get a free homeowners insurance quote today?
Have you ever been surprised by something you thought was covered that wasn’t? Feel free to share your thoughts in the comments section below.