Risks your homeowners insurance doesn’t cover
Rebecca Warren is a certified financial planner and certified senior adviser in Mesa. She can be reached at (480) 357-8380 or by e-mail at rebecca@warrenfinancialservices.com.
Most people are pretty comfortable with their homeowners coverage, but major events like hurricanes, earthquakes or floods cause many to ask, “Does my coverage fully protect me?” The answer, in quite a few cases, is no. Homeowners insurance is a package plan. This means it has several areas of coverage, broadly divided into two areas: property and liability. Property insurance provides coverage in four areas: dwelling (your house), other structures, personal property and loss of use. In this article, we focus on home coverage. Homeowners coverage is not always adequate. For example, if your house has appreciated a great amount (for example, more than 20 percent), and you have not increased your coverage, you may be underinsured. This may result in a penalty if you have a claim. Smaller increases of appreciation won’t matter, but large ones may require additional coverage. Most policies on newer houses are written on an all-risks or open-perils basis. This means that, as long as something is not specifically excluded, it’s covered. However, several risks or perils are almost always excluded. For instance, a few years ago most insurers stopped covering damage from mold, and unfortunately, there’s not much to be done about that except to protect against mold in the first place (not always an easy task). Earthquakes are also normally excluded from coverage. However, this coverage is usually available as an endorsement to the policy. Fault lines crisscross the country, and an earthquake is a possibility just about anywhere. If the risk is low in your area, the premium to insure against it is probably also low. Unfortunately, in some areas of the country, earthquake coverage is extremely expensive. Of course, in those areas, it’s also crucial to have it. Flood is another peril that is almost always excluded from coverage. Here, your regular insurer is unlikely to have coverage. Most people who want flood coverage must get it from the National Flood Insurance Program (NFIP). Premium costs vary based on coverage amount, as well the house’s location. There is usually a standard $500 deductible, and annual premiums for an average home can range from around $300 to more than $5,000 (see resources below for more information). It’s important to remember that flood doesn’t just mean that the river or ocean has overflowed. It can also include just about any rapid accumulation of water (or mud) from outside your house. What do you do if you have a claim and you think you are not being treated fairly? First talk with your agent or insurer’s home office to clear up any possible misunderstandings. However, you may feel that you need a knowledgeable third party to help you through the process. For many people, that third party is a public adjuster. A public adjuster is a professional you hire to handle the details of your claim. They work for you — not the insurer, so they (arguably) have your best interest at heart. If you want to hire a public adjuster, start with their professional association: the National Association of Public Insurance Adjusters. You can search the association’s Web site, www.napia.com, to find an adjuster. Here are some other resources to check out:
• www.floodsmart.gov/floodsmart/pages/index.jsp: the federal National Flood Insurance Program.
• www.iii.org/media/hottopics/insurance/earthquake/: Insurance Information Institute.
