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Summer 2019  Volume 15, Number 2        

house with insurance gap

6 Common Homeowners Insurance Coverage Gaps

Many of the following types of losses may not be fully covered under a basic homeowners policy. Some may require separate policies.

  1. Increased Construction Costs – If your home is more than a few years old, it might not comply with current building codes. After a loss, building codes may and likely will require you to bring your entire home up to code if it was not in compliance previous to the loss. Without an appropriate endorsement to your policy, your insurance company will not pay for this.
  2. Debris Removal – If your home is destroyed or damaged, you'll probably have some trash and debris to remove before repairs can begin. The typical homeowners property policy provides debris removal coverage but the amount is usually limited to 25 percent of the insurer's liability for direct covered damage, plus any applicable deductible. In many cases, the amount paid for debris removal also reduces the amount available for direct property damage claims.

    Don't underestimate the cost of debris removal, especially if your home is older, since it could contain lead paint, asbestos and other contaminants that require special handling and disposal by law.

    You might also have debris removal costs even without any covered property damage. For example, a flood or windstorm could deposit debris from another property onto yours.
  3. Umbrella Insurance – What happens if you are sued when your neighbor slips and falls on your property? Or your dog bites a stranger? Or even for causing an auto accident resulting in a serious injury where you are found liable. The costs associated with any of these events, including damages and legal expenses, can easily exceed the limits of a typical homeowners or automobile insurance policy.

    That's where umbrella policies come in. The coverage begins once you reach the limit of your underlying homeowners or auto policy (whichever applies), up to the policy limit, usually $1 million or $2 million. For instance, with a $1 million loss, your homeowners insurance would pay out its limit (say, $500,000) and your umbrella policy would pay the remainder.
  4. Home Based Business – Most homeowner's policies exclude claims resulting from "business pursuits." So, there's no coverage if a client slips and falls while visiting you. Your policy also will not cover loss to business personal property, leaving you with no coverage for your computers and other valuable business equipment. Even if you claim your computers as primarily for personal use, most homeowner’s policies provide only up to $2,500 in coverage for electronics.
  5. Flood – Floods are four times more likely to occur than fires, according to insurance ratings company AM Best. Just a few inches of water from a flood can cause tens of thousands of dollars in damage…which your homeowners policy won't cover.

    Flood insurance offers less coverage than your regular homeowners policy. It is designed to help get flood victims back on their feet, rather than fully compensate for their loss. It covers damage to a building, including the foundation, posts, pilings, piers or other support systems for elevated buildings. It covers any direct physical losses caused by a flood or from flood-related erosion, including a flash flood, an abnormal tidal surge or excessive waters resulting from a severe storm. Flood insurance also covers damage caused by mudslides.

    Coverage is available through the National Flood Insurance Program and private insurance.

  6. Earthquake – Many areas of the U.S. are vulnerable to damage from earthquakes or seismic activity. These include many areas of California, coastal areas of Oregon and Washington, along with several cities on the East Coast, including Charleston, S.C. and Boston. Another major earthquake in the New Madrid Seismic Zone in the central Mississippi Valley could devastate Memphis and St. Louis, with damage possible in areas ranging from Arkansas and Mississippi in the south to Illinois and Indiana in the north.

    In Missouri, the percentage of homeowners who have earthquake coverage ranges from a high of 63 percent in St. Louis County, to a low of 32 percent in Pemiscot County. Even in California, where residents have had more recent reminders of the Earth's power, only about 12 percent of homeowners have earthquake coverage.

    The standard homeowners policy excludes coverage for damage from all types of earth movement, including earthquakes, landslides, mudslides and shock waves associated with volcanic activity. You can buy earthquake coverage in a separate policy or add coverage to your homeowners policy by purchasing an earthquake endorsement.

If you feel you need coverage for any of these gaps, please contact us.

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In this issue:

This Just In...

6 Common Homeowners Insurance Coverage Gaps

Five Most Common Dangers in your Home

What Does that Speeding Ticket Really Cost?

Home-Based Business Insurance Options



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