Seal the gaps in your homeowners insurance
Perusing your homeowners insurance policy, you can easily find a number of unlikely disasters you have coverage for. You may also be surprised to discover that your insurer won't honor a claim in several other scenarios, including some more common calamities.
The policy might assure you that you'll be covered in case a volcanic eruption occurs in New England, but that you shouldn't bother filing a claim for damage caused by seismic activity related to said volcano. Or perhaps you can be reimbursed for a deorbiting satellite that crashes into your roof, but there's a high deductible when a tree branch smashes through a window during a windstorm.
Homeowners insurance can provide relief in a number of different scenarios, and it's important to maintain coverage to protect your home. But you'll also want to make sure you aren't leaving any gaps that could cost you a bundle after an emergency.
One of the most common incidents where homeowners are unexpectedly uninsured is flooding. Daniel Bortz, writing for the National Association of Realtors, says flood insurance is a separate policy from the standard homeowners insurance policy. It must be purchased through the federal government's National Flood Insurance Program or certain private insurers.
Some homeowners don't know that they need to purchase this supplemental coverage, while others don't believe that their home will ever be affected by flooding. Check the flood maps in your area to see if your property is in a high risk area. The policy can also be helpful if you live near a flood zone, since a particularly bad flood could affect your home.
Standard policies can cover some water damage that isn't caused by a flood, such as burst pipes. However, insurers often won't cover damage caused by a sewer backup or a sump pump breakdown. Matthew Boyle, writing for the Sylvia Group insurance company in Dartmouth, Mass., says a rider added to your policy can close this gap.
Homeowners insurance policies are usually based on the estimated cost to rebuild your home, not the market value of the property. In many cases, you won't need coverage up to the market value since it will be cheaper to rebuild. But Jessica L. Anderson, writing for the financial publication Kiplinger, warns that you'll need to make up the difference if your policy doesn't cover the replacement of your home.
Homeowners insurance can offer protection in the event of damage to your home, but an insurer may not cover the loss of personal items if you cannot prove that you owned them. Boyle says it is a good idea to have an inventory of items in your home, including photographs and pertinent information such as serial numbers, to provide a record of your belongings. Store this inventory electronically or in a secure place such as a safe deposit box.
Insurers may offer only limited reimbursement for valuable items, so you'll need a scheduled personal property policy or other coverage to protect them. Tim Parker, writing for the financial site Investopedia, says some items that may be only partially reimbursed in the event of theft or destruction include cash, firearms, and jewelry.
Many people operate businesses out of their home, but the typical homeowners insurance policy offers limited coverage for any equipment related to this work. Anderson says there is often a cap for reimbursement related to damaged or destroyed business equipment, and liability coverage may not be provided for the business. A separate home office rider or policy can be purchased for a modest annual cost.