Be Aware of Common Coverage Gaps

If your home or personal property suffers damage from a long list of named and unnamed perils, your homeowners insurance will typically reimburse you, up to the policy limits.

But even if you have a comprehensive policy, certain types of damage may require the purchase of a separate policy, and others may call for an additional rider to your existing policy.

You may not realize it, but a few risks are simply excluded by most insurers. It’s important to know whether your property is subject to any of these potential hazards so you will not be caught unaware and uninsured in the event that you encounter a problem that is costly to remedy.

Here’s a list of some common coverage gaps and how you can help protect your family from the financial difficulties that can accompany just about any mishap.

Natural Disasters

Because natural disasters such as earthquakes, floods, and hurricanes have the power to inflict widespread, catastrophic damage, they are generally excluded from homeowners insurance coverage. However, if you live in an area that is prone to such events, separate policies are available. Flood insurance can be purchased from the federal government’s National Flood Insurance Program. Supplemental earthquake coverage is available through a state-run program in California. Gulf Coast residents may need to seek hurricane coverage offered by a high-risk pool.

More Water Problems

Some types of water-related issues, such as damage caused by wind-driven rain or burst pipes, are typically covered. Unfortunately, cleaning up a nasty mess caused by a sewer backup is frequently not included, so read your policy carefully. Even if the problem seems to stem from your city’s system, it could be difficult and expensive to prove it. If backups are excluded from your policy, you can often buy a rider that may provide more coverage. Most insurers exclude mold remediation, unless it results directly from an insured event like those mentioned above.

Lifestyle Hazards

Additional risks may be associated with certain activities on your property. The presence of pools and spas, for example, often prompts higher premiums.

Certain breeds of dogs, when kept as pets, will cost more to insure or could even be excluded altogether. You must read your policy carefully and let your insurer know if you have a dog on the premises. Keeping pit bulls, Dobermans, Rottweilers, German shepherds, wolf hybrids, and other breeds that have been known to bite could be a deal-breaker with your insurer.

You also may be surprised to learn that trampolines — and the injuries that result from their use — are often excluded entirely.

Not Coverable

Insurers will not take responsibility for damage to your home that arises due to poor maintenance, normal deterioration, faulty workmanship, or neglect on your part, so it pays to keep your property in good condition over time. Along the same line, damage that is inflicted intentionally by a family member will probably not be covered.

Finally, most insurers exclude acts of war, terrorism, nuclear or radiological accidents, sinkholes, and any kind of environmental contamination that might affect your property — however unlikely.

The range of possible exclusions differs greatly by region and even from one policy to the next. You may want to discuss whether you have adequate insurance coverage with your own agent, taking into account any additional risks associated with the area in which you live and your family’s specific lifestyle.

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.