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Purchasing homeowners insurance is a relatively affordable way to protect what is likely your biggest investment. (Insurance may also be required by your mortgage lender.) But before you buy home insurance, be sure you understand what it does and doesn't cover.
What Is Not Covered by Homeowners Insurance?
Standard homeowners insurance policies usually don't cover the following:
Earthquakes, Floods, Sinkholes and Landslides
Every home is at risk of burglary or fire, but not every region is likely to experience earthquakes, floods, sinkholes or landslides. These risks are typically limited to certain parts of the country, so they aren't covered by standard home insurance.
Sewer Backups, Septic Tank Backups, Drain Backups or Sump Pump Failures
Home insurance covers many types of water damage, such as flooding from burst pipes or damage to roofs due to snow, ice or rain. However, it doesn't cover damage from sewer, septic tank and drain backups or from a failed sump pump.
Wear and Tear
Replacing or repairing aging home systems isn't covered by homeowners insurance; you're expected to maintain those on your own. For instance, insurance typically covers a roof damaged by a hurricane, but not a roof that leaks because it's 30 years old.
Animal and Insect Damage
Homeowners insurance usually won't cover damage to your home from animals or insects, such as rodents or termites. Structure damage from larger wild animals (such as a bear breaking down your door) may be covered, but personal property damage generally won't.
Dog Attacks
Most standard homeowners insurance covers you if your dog bites a visitor. However, if your insurance company considers your dog's breed to be dangerous or if the dog has previously bitten someone, insurers may require you to sign a liability waiver or refuse to insure you at all.
Standard homeowners insurance also won't cover:
- Damage you intentionally cause to your home
- Damage from war or government seizure of your property
- Damage due to nuclear accidents
- Damage from pollution
What Is Covered Under a Homeowners Insurance Policy?
A standard homeowners insurance policy generally includes four types of coverage:
- Dwelling or structure coverage pays to repair or rebuild the physical structure of your home if it's damaged or destroyed by fire, smoke, hail, lightning, vandalism, theft, wind or another covered event. It usually covers other structures on your property, such as garages, sheds, fences and gazebos. Water damage from burst pipes or damage to your roof due to snow, ice or rain is typically covered too.
- Personal property coverage pays to repair or replace personal possessions such as furniture, appliances and clothing stolen or damaged in a covered incident. Belongings outside your home, such as in a storage unit or your car, may also be covered. Personal property coverage for valuables like computers, jewelry and furs is typically limited to a few thousand dollars, but you can buy additional coverage for them.
- Liability coverage pays medical and legal costs if a visitor is injured at your home and sues you. It also covers harm that members of your family cause to another person or their property, such as breaking a neighbor's window.
- Additional living expenses (ALE) coverage helps pay the cost of living elsewhere while your home is repaired or rebuilt. Also called loss of use coverage, ALE kicks in if your insurance company decides your home is temporarily uninhabitable.
Homeowners Insurance Add-Ons
Since there are some things home insurance doesn't cover, consider the following homeowners insurance add-ons to fully protect your home.
Flood Insurance
Use the Federal Emergency Management Administration (FEMA) flood map to check your home's flood risk. If you're in a flood zone, your mortgage lender may require flood insurance. Even if they don't, it can be a smart investment to safeguard your home.
Insurance carriers that partner with FEMA's National Flood Insurance Program (NFIP) offer flood coverage of up to $250,000 for structures and $100,000 for personal property. You can also buy flood insurance from private insurers, which may offer more coverage.
Earthquake Insurance
Earthquake insurance covers your home's structure, your personal property, loss of use and the cost of rebuilding your home to comply with current building codes. It generally also covers damage from landslides.
Deductibles for earthquake insurance typically range from 5% to 25% of the dwelling coverage limit. Earthquake insurance is available from private insurance companies. In California, where earthquakes are a common concern, earthquake insurance is available through the publicly managed California Earthquake Authority (CEA).
Sinkhole Insurance
Insurance companies in some states are required to offer sinkhole insurance, either as an endorsement to standard homeowners insurance or as a stand-alone policy. While premiums typically range from $2,000 to $4,000 annually, according to insurance site Trusted Choice, the cost may be worthwhile if sinkholes are common in your area.
Water Backup Insurance
Water backup insurance pays for damage due to water backing up into your home from a drain, sewer or sump pump failure. It's usually available as an endorsement or rider to your home insurance policy.
How to Save Money on Home Insurance
Nationwide, homeowners insurance costs an average of $1,411 annually, the National Association of Insurance Commissioners (NAIC) reports. Fortunately, there are plenty of ways to save.
- Raise your deductible. When you file a home insurance claim, your deductible is subtracted from the amount the insurer pays. There are generally separate deductibles for damage from floods, earthquakes, hurricanes, wind and hail. Increasing your deductible typically lowers your premiums; just be sure you can afford the higher deductible if you have a claim.
- Shop around. Every year or two, get quotes for the same type and amount of home insurance from several insurance carriers and compare them to your current costs. You can get quotes from insurance company websites, insurance agents or brokers—or save time by using an online insurance marketplace to get multiple quotes in one place.
- Search for discounts. Insurance companies may offer discounts for members of certain organizations, buying more than one type of insurance policy ("bundling"), paying annual premiums in full, purchasing insurance online or setting up autopayments. Comparing any current discounts to those offered by other insurance carriers could reveal new ways to save.
- Safeguard your home. Home improvements that reduce risk can translate to lower insurance premiums. Updating old heating, plumbing or electrical systems; installing burglar alarms or smoke detectors; or fencing in a pool or spa could cut your insurance costs.
- Improve your credit score. In most states, insurance companies check your credit-based insurance scores and typically charge lower premiums for those with higher scores. Your consumer credit score differs from your credit-based insurance score, but both are based on information from your credit report. Checking your credit score—and improving it if necessary—could help boost both scores.
The Bottom Line
When you own a home, it's important to budget for recurring expenses such as routine home maintenance, property taxes and homeowners insurance. Shopping around for home insurance, looking for discounts and maintaining good credit can help you save money on home insurance so you can afford the protection your home needs.