We purchase insurance for one reason – to pay for our loss when something bad happens.
But search any insurance company on Google, and you’ll see a bunch of complaints from folks whose policies didn’t pay. These people are usually mystified and miffed, and ready to tell anyone and everyone how terribly the insurance company treated them.
As agents, we’ve read through a lot of these complaints, and sometimes we immediately know why the claim was denied. We know that it’s difficult to truly understand what your Homeowners insurance policy covers, so today we offer…
The Top 5 Reasons Your Homeowners Claim Could Be Denied
Every homeowners insurance policy has a deductible, an amount of money YOU agree to pay in a claim. If the amount of damage is LESS than your deductible than your insurance policy would not have coverage for that claim.
The most common homeowners deductible is $1000
Often, there is a different deductible for WIND or HAIL claims. This deductible is likely higher than the deductible for any other type of claim. Make sure to study your policy and understand what both your ALL PERILS deductible and your WIND-HAIL deductible are.
ACTION STEP: Ask your agent how much it would cost to have a $1000 deductible
2. Covered Perils
The most common misconception: insurance policies cover any damage to your home.
The reality is this: all Homeowners policies are meant to cover a sudden loss with an immediate source of the damage. The sudden loss is often referred to in your policy as an Occurrence, and the immediate source of damage is called a Peril.
Perils are the source of the bad thing that happened. Lightning, Wind, Fire, & Theft would all be considered perils. DIFFERENT POLICIES COVER DIFFERENT PERILS. Here are the three types of policies and what they cover:
BASIC (HO1 or DP1) – Covers 11 Named Perils or 11 types of bad things that happen
BROAD (HO2 or DP2) – Covers 16 Named Perils or 11 types of bad things that happen
SPECIAL (HO3 or DP3) – Covers ALL PERILS unless they are excluded
For a claim to be covered, an insurance company adjuster must be able to see there was an occurrence (or sudden loss) caused by a Peril covered by your type of policy.
ACTION STEP: Make sure your policy is an HO3. If not, find a policy that is. Ask for SPECIAL coverage for your dwelling and your personal property.
Certain things are limited or specifically excluded in homeowner’s policies. The most common exclusions are floods, earthquakes, and water back up/sump overflow. A common exclusion in coastal states is hurricane/wind and hail. Wildfires are often excluded in areas where wildfires are common. In most cases, the excluded Perils can be covered separately for additional cost.
ACTION STEP: Add Water Back-Up Coverage. Consider adding earthquake as well
4. Liability is Elsewhere
Liability coverage is for when bad things happen to other people because of you. But sometimes bad things happen to you or your home because of other people. The most common example is people you hire to do work on your property. Landscapers, house cleaners, and tree trimmers are all examples of people who come onto your property and could cause damage to it. When they cause damage the liability is on them. That’s means their insurance policy should pay and yours likely won’t
ACTION STEP: Only hire service providers that have liability insurance
5. Maintenance VS Occurrence
Homeowners insurance policies don’t cover basic maintenance to your home. If your roof is old and leaky, it needs replaced. Your insurance policy won’t cover that. If your furnace breaks down, you need a new one. Your insurance policy won’t cover that.
Insurance policies cover OCCURRENCES, a single bad event that damages your home.
ACTION STEP: Keep up on your home’s maintenance
We hope this post was information without being too scary.
Well built insurance policies should have the right coverage when you need it. Just don’t get distracted by a low priced policy that’s stripped of all the important coverage and you’ll be fine.
If you need an agent to help you make sense of it all, CLICK HERE. We’d be glad to help.
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