Always ask the right questions about your home insurance coverage (part 2)
Always ask the right questions about your home insurance coverage (part 2)
10 second overview: Understanding what is and isn’t covered by home insurance is very important. In this second installment of this 3-part series, SmartCitti’s insurance expert, Mark Chappell, explains why certain risks aren’t covered by home insurance and what you can do to avoid having to pay out-of-pocket for liabilities or extensive home repairs.
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In Always ask the right questions about your home insurance coverage (part 1) we helped you understand the kind of coverage you need from your homeowner’s insurance and the essential questions you should ask to find out what’s included in your coverage plan and what’s not. Read part 1 here.
Owning a home requires a new level of vigilance and attention to possible risks and liabilities. However, being vigilant shouldn't leave you stressed and worried. This is where the right home insurance policy comes in.
According to SmartCitti's insurance expert, Mark Chappell, homeowners should evaluate their level of exposure to a variety of risks and liabilities before choosing a home insurance policy. The range of possible risks and liabilities will depend on the value of the home property, the location of the property as well as the homeowner's lifestyle.
Mark also says that homeowners need to understand and come to terms with the responsibilities of property ownership because how well these responsibilities are carried out will invariably influence the size of insurance pay-out they can expect in the event that something undesirable occurs. Here are six areas of possible risk and liability homeowners should consider:
Key question: “Will my home insurance pay back the cost of buying new items if I am burglarized?”
While you can get coverage for break-ins and theft, homeowners are better served by taking action to mitigate such incidents. According to Mark, 90% of home break-ins can be stopped by installing a home alarm system or CCTV.
Research shows petty thieves are discouraged by simple alarm systems which notify local law enforcement once triggered and sophisticated break-ins are also relatively rare today because CCTV installations are now very common.
So, homeowners need not rely solely on insurance coverage when they can secure their properties and forestall thefts by installing simple and affordable home security systems.
It's also important to recognize that the cost of a break-in or theft is often more than the property lost. The sense that one's home and private space has been breached or compromised can cause significant psychological and emotional damage which insurance policies do not cover. So, it is always in a homeowner's interest to take measures to keep their property secure.
Key question: “Am I covered if a friend or guest gets hurt while on my property?”
This is a very important scenario to consider because we often host gatherings and formal engagements in our homes. It could be a neighborhood meeting, a local club event, a charity get-together, a wedding, a funeral, a church meeting, a small party, or an all-out fete.
As a host and homeowner, you are responsible for the physical safety of your guests and may suffer significant liabilities if an injured guest can show that you did not take adequate precautions to reduce the chance of injuries on your property.
According to our insurance expert, an insurance agent can be of great help in this regard as they will often inspect your property before recommending an insurance package, additional benefits, and even additional fittings for your home.
For instance, a good insurance agent would stress the importance of having a fence around your pool or ensuring that the tiling around your pool has the right kind of grip and support. So, in the event that you are sued for injury sustained while jumping into your pool or while touring your property, you can be assured of coverage particularly if there is evidence your property had all the necessary protective installations.
Key question: “What kinds of damage are covered by my home insurance?”
It's important to be aware that insurance, by definition, does not cover all possible risks. Risks arising from ordinary wear, tear and depreciation are not covered and according to our expert Marl Chappell, taking care of your home can save you from having to pay for expensive repairs not covered by your home insurance.
Mark stressed that, "If your home gets damaged because something is poorly made or has a hidden defect, you will not be covered by your home insurance. The same applies to damages resulting from mechanical breakdowns and power outages." So, if a power outage causes the food in your freezer to spoil or an old water heater breaks down, suddenly flooding a house, the homeowner will not be covered by home insurance.
So, ask yourself: How good is my home piping system? How old is my water heater? Do I need to have my home piping and water heater changed? Getting expert advice on these and other mechanical fittings in your home can save you a lot in repair costs which home insurance will not cover.
Key question: “Am I covered if my home is damaged by mold infestation or insect damage?”
According to Mark Chappell, damage resulting from these kinds of problems are generally not covered by home insurance because they are often the result of negligence on the part of the homeowner. For instance, failing to repair an indoor water leak can lead to mold infestation. Similarly, poor refuse disposal and unsanitary conditions can attract insects and rodents.
However, there are exceptional cases where special bonds and insurance may provide some support if the problem is widespread or endemic to a particular area.
Take the case of termite damage in Alabama. As Mark explains, "In Alabama alone, termite damage amounts to $60m, affecting 12,000 homes annually. Thankfully, Alabama has termite bonds to cover this."
Consequently, homeowners should make every effort to understand the kinds of property damage that occur where their properties are located and take necessary precautions in addition to leveraging group protections where available.
Key question: “What happens if my home is damaged by a terrorist attack or nuclear hazard?”
Due to the nature of the times, damage resulting from terrorism, war or civil unrest are not as unlikely as they were some decades ago. Unfortunately, these kinds of damage are not covered by insurance companies. Essentially, insurance companies have a war exclusion clause which protects them from having to pay for damages caused by wars or armed conflicts.
Mark Chappell explains that "The war exclusion clause became an important issue in the insurance industry following the Sept 11, 2001, terrorist attacks on New York City and Washington D.C. Before the attacks, most war exclusion clauses applied only with respect to contractually assumed liability on the theory that private persons and organizations cannot otherwise incur liability in connection with war. However, after September 11, 'war and terrorism' exclusions that broadened the war portion of the exclusion beyond contractually assumed liability were quickly added to liability policies."
The reason for the war exclusion clause is easy to understand since most insurance companies would be bankrupted if they had to pay for the scale of damages caused by war. The good news is that governments tend to have assistance packages of various kinds designed to help people rebuild their lives and properties after wars and terror attacks. So, in a situation like this, look to your government not insurance companies.
Key question: “What happens if I lose my credentials or suffer identity theft?”
According to SmartCitti's insurance expert, identity theft coverage is usually not included in homeowner's insurance but may be purchased as an endorsement. Identity theft coverage via endorsement covers all expenses incurred due to identity theft incidents.
However, it is important to note that endorsement coverage for identity theft is often limited. So, homeowners are advised to take necessary precautions to protect their credentials especially while performing transactions online.
For instance, by using secure broadband/internet connections, secure devices, secure payment platforms like PayPal to avoid entering credit or debit card details on every platform, and making online purchases via secure and encrypted sites.
The third part of this series explains what minimum coverage entails and the three levels of insurance coverage homeowners can get.