Homeowner’s Insurance Inclusions/Exclusions and Impacts of COVID-19

When you purchase a home, you will be confronted with the issue of acquiring home insurance. Just like any other type of insurance coverage, there are dozens of options, all with different terms and offered at varying prices, which makes the decision difficult. Many people overlook the details and simply subscribe to the most affordable plan; unfortunately, this often results in immense economic consequences, especially in times such as today when we are living through a pandemic.

Therefore, it is important to identify the right insurance for you to ensure that you can avoid a financial blunder. In this article, we will outline which incidents home insurance covers, what kinds of problems are commonly excluded, how to identify which supplemental policies you should acquire, and how homeowners have been impacted by the COVD-19 pandemic. Also, finding a good insurance brokers can be one of the best ways to get educated and find the best policy for you.

Homeowners Insurance 101

What is Homeowner’s Insurance?

Homeowner’s insurance is a form of property insurance that cover losses and damages to an individual’s house and the assets in the home. Policies commonly cover interior damage, exterior damage, and loss of or damage to personal assets, as well as injuries that arise while on the property.

Who Needs Homeowner’s Insurance?

Homeowner’s insurance is typically required by lenders when a homeowner has a mortgage, but it is also recommended to all homeowners.

What is Covered by Homeowner’s Insurance?

Not all damage to a home will be covered by a basic insurance policy, and the details will vary depending on the insurer. According to the National Association of Insurance Commissioners, the most common insurance plans will cover damages caused by the following (outlined on the Insurance Services Office ‘ISO’ HO-3 policy):

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism
  • Theft
  • Falling objects
  • Weight of snow, ice, or sleet
  • Accidental discharge or overflow of water or steam
  • Sudden and accidental tearing apart, cracking, burning or bulging
  • Freezing of plumbing
  • Sudden and accidental damage from an artificially generated electrical current
  • Volcanic eruption

Homeowner’s Insurance Exclusions

While the list of covered damages is extensive, there is also a large portion of incident types that are not covered by homeowner’s insurance. These exclusions can be costly if a homeowner is not prepared. They include damages from these sources:

  • Earth movement, such as earthquakes, landslides, mudslides, subsidence, sinkholes, etc.
  • Water damage, such as damage from flooding, surface water, waves, tidal water, a sewer backup, or groundwater
  • Power failure or nuclear hazard
  • Neglect or intentional loss
  • War and terrorism
  • Governmental action and ordinance of law
  • Mischievous acts, or vandalism
  • Birds, vermin, rodents, or insects
  • Animals owned by the insured
  • Loss of rent
  • Mold, fungus, or wet rot (with exceptions)

Selecting and Using Homeowner’s Insurance

A homeowner will want to select their base policy and their supplemental policies depending on the location of their home. The most basic plan is a great start, but if you live in specific high-risk communities, additional coverage will be essential.

For example, if you live in California, a state known for frequent wildfires and earthquakes, you will want to be sure your basic coverage covers fires and that you also purchase earthquake insurance. In addition, you may want to consider insurance for flooding, specifically if you live along the coast.

On the other hand, if you live on the coast of Texas, you will not need to be concerned with insurance for an earthquake, but you should be prepared to purchase insurance for flooding. The annual hurricanes make this coastal region high risk, and every year, the storms put homeowners at risk of losing their homes completely.

Is It Worth the Cost?

Many homeowners review the costs of the supplemental coverage plans and are uncertain whether the costs are worth the potential reward; in fact, many even skimp out on the basic plan. However, as we stated previously, this can be a costly gamble. Your home is your investment and for many, even a retirement plan. Therefore, the loss of a home can be devastating to the homeowner’s vision for their future. Ensuring that you are fully covered can provide peace of mind and greater certainty for your plans.

Finding Coverage

When selecting an insurance policy, it is best to conduct your due diligence and ensure you are getting the right coverage at the right cost from the right company. It is often recommended to hire an insurance broker; they will be able to help you identify the most advantageous policies for your specific location, and they can direct you to companies with positive reputations.

It is important to note that selecting the wrong company can be even more costly than not having insurance at all – The last thing you want is to pay for an insurance plan, file a claim when something goes wrong, and then be denied compensation because the company was dishonest in the process.

Homeowner’s Insurance and COVID-19

Now – It is 2020, and we have all been affected by a global pandemic. We have witnessed consequences we never imagined possible. Many are struggling at home and are concerned about how their homeowner’s insurance policy has been impacted by COVID-19. There have been three key points that have surfaced prominently at this time:

  1. Many homeowners are experiencing extended wait times on their filed claims. As a result of closures and limited resources, processing claims is taking longer than usual. Homeowners are asked to be patient during these unprecedented times.
  1. Homeowners are struggling to make payments as a result of an economic downturn. Due to the millions of Americans in the same situation, states and companies alike have created guidelines to help customers and citizens. For example, some companies are offering delayed payment options, and some states are requiring grace periods on payment due dates.
  1. Homeowners are learning about the variances in their coverage. As more people transition to working at home, they are discovering that not all of their assets are covered by their homeowner’s insurance policy – That is, their business property is not covered. As work-at-home trends continue, people are adjusting their claims to ensure that they are more completely protected.

While these concerns exist for many, it is worth noting that most homeowners have not experienced any disruption in their policies.

Moving Forward

COVID-19 has taught us that we never can truly be prepared for everything – Few could have imagined that we would be spending 2020 battling a global pandemic. However, what we can do is assess the potential risk and plan accordingly. The best action homeowners can take today is to contact a broker and learn more about their policy and whether they have adequate coverage – You may not have been prepared for COVD-19, but you can try to prepare for the next unanticipated event in your life.

Another overlooked component of property management is The Reserve Fund. Read more about that in this article.

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