Home insurance policies are designed to protect your personal property and provide reimbursement in the event of damage or loss. Yet, when a claim is filed, many people are surprised to find certain items are excluded from coverage. Likewise, some individuals miss the opportunity to file a claim, not realizing they have experienced a covered loss. Below are five areas that tend to cause confusion in the world of home insurance. Do you know which ones are covered by your current policy? (Hint: Ask your insurance agent if you aren't sure.)
Typically, home insurance covers only minor losses such as damage or theft of home office equipment. According to Paul Martin, CPCU, another example of a covered loss would be damage caused by your child's after-school job mowing a neighbor's grass. Most home insurance policies provide a $2,500 loss limitation for business property such as inventory kept in the home, computer equipment, or a fax machine. Yet, those who store inventory such as Pampered Chef items, for example, know how quickly $2,500 adds up.
Also, don't count on your home insurance to cover business liability losses. If you're named in a lawsuit connected to a business that is run out of your residence, home insurance won't cover any related claims. Regarding business activity conducted in your home, purchasing separate business insurance is the best way to guarantee proper coverage.
Motorized items are typically not covered under home insurance for liability purposes. Recreational equipment such as an ATV used in your own backyard may be covered, but if you take that same ATV off of your property and sustain a loss, it will not fall under your home insurance policy. Until recently, even the small motorized Barbie Jeeps driven by young children were excluded from home insurance, but now they are sometimes explicitly named in newer policies.
Motorcycles and golf carts, along with large motorized watercraft, are additional examples of items that are not automatically covered, although some smaller motorboats and sail boats may be included in coverage. Other watercraft such as canoes and kayaks fall under a loss limitation of $1,500.
According to the Insurance Information Institute, dog bites accounted for more than one third of homeowners insurance liability claims in 2013, amounting to $483 million in payouts. Most accidents or injuries caused by pets are covered by home insurance unless your policy specifically names a certain breed or size of animal that is excluded. Also, keep in mind that if your dog does bite a human or another dog, it may be excluded from future insurance coverage.
Flood insurance is the prime example of a loss not covered by home insurance. Flood insurance is a federally subsidized program which must be purchased separately, and premiums are set by the National Flood Insurance Program. Earthquake insurance is another example of a required separate policy. Although many people in earthquake-prone areas do consider buying this policy, the risk of loss is still present for those living in parts of the country who may suffer from unexpected earthquakes such as the August 2011 event shaking the East Coast. Volcano damage is also generally excluded from coverage, even in limited geographic areas with an elevated risk of this danger.
Which acts of nature are covered? Hail, wind storms, tornadoes and wildfires are generally included in home insurance policies. Hurricane damage is covered under home insurance as well, except for flood-related damage stemming from these large storms.
Musical instruments, like many other high-value items, fall under a theft loss limitation for home insurance purposes and require a separate rider or policy to guarantee full replacement cost. Otherwise, the $2,000 piccolo that your musically gifted child plays may not return your full investment if he or she drops and breaks it. The same rules apply for firearms, jewelry, silverware and other high value collectible items.
One final instance of insurance protection which causes confusion involves borrowed items. If you borrow an expensive item from your neighbor, such as a high-powered snow blower, and it breaks under your care, you may be liable. Even though the incident occurred on your property, home insurance will not cover any related claims, so you may need to personally bear the cost of replacing your neighbor's equipment.
If you have questions about personal property items which may or may not be covered by insurance, a Trusted Choice agent can help. Trusted Choice® independent agents work for consumers, not a large parent company, and they are happy to assist you by writing a policy tailored to meet your individual insurance needs.