You have been a home owner already for some time, and noticed the increasing likelihood of a natural disaster or other unforeseen events affecting your house. Or you are thinking about getting a new home insurance and are not aware of the available policies actually cover. Do you know whether the policy has provisions to help you rebuild after a flood, earthquake, or fire?

This article answers questions that keep popping up in consumers' minds about insurance coverage. Furthermore, you'll find some of the events that are not covered in the regular home owner's policy. In the following sections you will also be able to understand the existing loopholes in the policy. Homeowners-3 is the most common home owner's policy in the United States and to simplify explanations we assume that you have a HO-3 policy. If you have a different policy, browse down to question 17.

The first set of questions is about the covered events: describes the protections and privileges offered by policies. The next section has a set of question focuses on issues that are not covered by the policy. Most consumers would find the final set of questions interesting, with crucial questions that need further explanation. Yet all attempts have been made to clarify the circumstances and the expected approach of the insurance company.

Question 1

Am I covered for direct losses caused by fire, tornadoes, wind storms, hail, explosions, vandalism, theft, lightning, smoke etc? YES.

The HO-3 policy provides intensive coverage to all the perils and disasters stated above and more. The list is provided in the detailed policy document. The amount of insurance varies from person to person so be sure that the dollar limit of your policy leaves you in a comfortable position. There is no point in saving a few dollars today and falling into trouble in an unforeseen situation. Some restrictions on wind damage coverage should be counted for if you reside near the Atlantic or Gulf coast. Also if you are a resident of any such area which is prone to hailstorms then there may be specific hail damage deductible. You must seek a clarification on hurricane/windstorm deductible from your agent.

Question 2

Am I covered for a pipe burst which leads to water flows all over my house?

YES

Any accidental discharge from a plumbing system is covered by the HO-3 policy. You are expected to get your plumbing and heating systems checked annually. After all its always better to be safe than to be sorry.

Question 3

Am I protected by my policy if my neighbor decides to drag me to court after falling on my porch steps or slipping on the sidewalk?

YES

Your HO-3 policy will cover all damages if any fall or accident takes place in your premises due to negligence on your part. All legal expenses occurred in defending any such claim is also covered by this policy. The medical payments of a neighbor or guest cause due to any mishap at your property will also be taken care of by the medical payments portion of your policy. The standard liability protection is about $10,000. You may wish to increase it to feel more secure.

Question 4

Am I covered if a tree falls during a storm and damages my roof?

YES

You are not only covered for the damage caused to the roof but your expenses of up to $500 in removal of the tree is also covered. However you should be regular in cutting of any dead branches, dying tees and prune branches in the vicinity of your home. It is not just about the safety of your house after all you would not want broken bones in your family.

Question 5

My golf clubs are stolen from the trunk of my car. Does my home owner's policy cover such loss?

YES

All personal property of yours wherever in the world they may be are covered by the HO-3 policy. Yet what you get may not be sufficient for you to purchase a new one especially if the stolen golf clubs were an old one. The policy offers only the current value of the old golf clubs, nothing more or less. Keeping in mind such circumstance you may consider protecting all your personal property with a replacement cost endorsement. This will ensure that you get the replacement cost of the golf clubs after the relevant deductions.

Question 6

Am I covered for damage caused by flood?

NO

It is better to get a flood insurance if your residential area is susceptible to floods. The federal government provides flood insurance under a program run by Federal Insurance Administration. Flood insurance also covers for damages caused by mud slides. You can easily contact your agent or company to know more about this or better still you must immediately call the National Flood Insurance program at 1-899-379-9531 or visit the website http://www.floodsmart.gov at your convenience.

Question 7

Am I covered for water seepage into my basement from the ground?

NO

Water seepage is not included in the HO-3 and for that matter if it is not caused by flood then it is also not covered by any flood insurance. It is an issue of maintenance. You must seek assistance from a contractor and make your basement waterproof.

Question 8

Am I covered for earthquake damage?

NO

Earthquake coverage is not included in any standard policy. This aspect is a matter of additional coverage and choice differing from area to area. You should seek advice on buying it or not from the concerned company representative. The cost of this coverage solely depends on the area you reside in. Thus it may differ drastically from one place to another depending on its proximity to earthquake prone zone.

Question 9

My house is close to the ocean. Recently it has come to my knowledge that if it is destroyed by the wind, the new building code requires me to rebuild the house on stilts. This will add about $30,000 extra to the cost of rebuilding my house. Am I covered for this extra cost?

NO

The HO-3 doesn't pay any extra costs caused due to ordinances or legislations of the law that regulate the construction of buildings. If you want these costs to be covered then you need to purchase an Ordinance or Law endorsement. With this you can walk through any changes in building codes without blinking an eye.

Question 10

Are my jewelry and other valuables covered?

You get protection of about $1000-$2000 incase of theft of jewelry under a standard policy. If you are in possessions of family heirlooms and other jewelry which is worth more then you must opt for higher limits. Further more you must add a floater to your policy if you possess precious stamps, paintings, silver ware, electronic equipments, precious stones etc. A floater will protect specific pieces of possessions it has been bought for. The floater will also provide higher limits and cover additional risks not covered by any normal policy.

Question 11

Will a $150 000 policy be enough to rebuild my house which has been totally destroyed by fire?

The HO-3 policy pays for structural damage on a replacement cost basis. Thus if the cost of rebuilding your house is within $150 000 then you have enough insurance coverage. Say for instance the cost of rebuilding is around $120 000 then your policy is comfortable but if it is say $180 000 then you will have to shell out another $30 000.

You must seek a guaranteed or extended replacement cost policy from your insurance company especially if you reside in an area frequented by storms. This will ensure that you get a certain amount over and above the policy limit to rebuild your home. You will now have extra funds to cover the high bills due to increased demand of contractors at such times.

If you choose not to rebuild your house then you will be awarded the actual cash value. This value is ascertained by deducting depreciation from the current value of your property. Before you decide in on the amount required to rebuild your house you must consult your real estate agent or a local property dealer.

At times people are confused between the price of the house and the cost of the structure. Any mishap will retain the land what needs to be rebuild is solely the structure. You need protection only against the cost of rebuilding the structure not purchase price of land. After all you would not want to pay unnecessarily hefty insurance costs.

Question 12

During a storm a tree falls but does no damage to my property. Am I covered for the cost involved in removal of the tree?

Your trees and shrubs are not covered for wind damage. They are covered for risks like vandalism, thefts and fire. However you will be compensated if a fallen tree blocks access to your house. You may desire extra coverage on the trees, plants and shrubs of your property. This extra insurance will help you cover not just the cost of replacement of fallen trees but also ease you from the burden of replacing them.

Question 13

If a storm causes a power outage which spoils all the food stored in my refrigerator and freezer and thus compels me to throw out everything am I eligible to make a claim?

In most circumstances it would be a no yet there are quite a few exceptions to this. Some states include food spoilage under the home owner's policy. You may also be covered if the power failure was a result of a break in the power line on or close to your private property. Your insurance agent will be able to confirm whether your state law allows food spoilage to be included in home owner's policy or not. You can easily go for food spoilage coverage in your policy by paying some additional premiums.

Question 14

My children are away at college. Does my homeowners insurance cover them?

Full time college students who are also a part of your household may be provided with some coverage by your policy. This generally tends to revolve around 10% worth of content in the concerned dormitory. However if your child lives off campus and rents a house in his own name then the company may not provide any benefit or coverage.

Question 15

I have a small power boat. If it is stolen, am I covered? Am I covered after being sued for a boating accident on the same?

The size of the boat, its horse power and your insurance company will determine whether you are covered for liability or theft or both or neither. The coverage provided for small boats under home owners policy differs significantly. You must seek advice from your insurance agent whether you need an additional Boat owner's policy or not.

Question 16

Am I covered for "acts of God"?

Who is 100% insured from the acts of god? Well in reality no one. The insurance policy does not explicitly use the term acts of God. It is understood to be included in the form of all natural disasters like earthquakes, tornadoes, hurricanes etc. Natural disasters like flood and earthquake are not covered in the homeowner's policy. However, you may be protected against calamities like windstorms, hail, lighting, volcanic eruptions etc.

Question 17

What should I do if my policy provides lesser coverage than the HO-3?

It is time you review the policy with your agent. You may still have an older policy than the HO-3 and hence may not be protected against water damage, theft or liability. You may still not be provided benefits by the replacement cost basis and would be covered under the actual cash value basis.

Actual cash value basis means replacement cost less depreciation. You may not feel the pinch of this policy if for example a destroyed roof was in great condition. Had the same been old and worn off then the depreciation would be much larger and the actual cash in your hand much smaller than expected. It would do you no harm if you get an HO-3.