Insurance is meant to protect you from losses. When you purchase a home insurance policy, you may think that you will not suffer any losses. However, the reality may be quite different. Many exclusion clauses could leave you without insurance coverage at a time when you need it most.
So, what are these exclusion clauses? Understanding what you are and aren’t covered for will give you peace of mind and could potentially save you from financial ruin. If necessary, you need to familiarize yourself with several important exclusion clauses and consider buying coverage for them.
You must thoroughly read your insurance policy and identify the exclusion clauses, which are the risks and financial losses that your policy does not cover. Disasters are unpredictable events, such as wildfires or earthquakes. One may typically be covered while the other isn’t.
You can usually cover these exclusions by purchasing an “endorsement” to protect yourself from the impact of these exclusion clauses. An endorsement, sometimes referred to as additional insurance, is an additional policy that covers exclusion clauses. It is often purchased through another insurance company, such as surplus line insurance.
When disaster strikes, your first concern is the safety of your family. Once the dust settles, it’s time to contact your insurance company and file a claim. Many people are surprised when they find out that certain catastrophic claims are not covered by their insurance. If these catastrophic claims are not within the coverage scope, it could lead to financial difficulties or even bankruptcy.
Floods are a common disaster that doesn’t necessarily always happen in flood zones. However, floods are not included in the coverage scope of a home insurance policy. Most people in coastal areas purchase flood insurance, but those living inland often overlook this insurance.
For example, most residents in Asheville, North Carolina, were victims of flooding from Hurricane Helene but did not have flood insurance. These residents are now facing financial difficulties or even bankruptcy.
If you don’t have flood insurance, contact your insurance agent or company to inquire about purchasing flood insurance. The company will directly enroll you in the National Flood Insurance Program (NFIP), which collaborates with over fifty private insurance companies. It can also sell flood insurance directly to you.
If your insurance company does not offer flood insurance, the NFIP insurance provider locator can help you find insurance companies near you.
However, please note: you must purchase flood insurance in advance. According to the Federal Emergency Management Agency (FEMA), there is typically a 30-day waiting period before an NFIP policy becomes effective.
Disasters caused by earth movement are not included in a home insurance policy. You need to purchase earthquake insurance. Your insurance agent can help you find and purchase this endorsement. Besides private insurance, if you live in California, you can buy this insurance from the California Earthquake Authority.
The deductibles for earthquake insurance are high. According to the National Association of Insurance Commissioners, deductibles range from 10% to 20%. This means that if you have a $300,000 home, your deductible will be at least $30,000.
Mudslides and landslides are not within the coverage scope of your standard homeowner’s policy, often surprising victims of these disasters. Even with earthquake insurance, mudslides and landslides are still not covered.
Mudslides and landslides are caused by erosion or water accumulation, which disrupt the stability of the land. Earthquakes are sudden events caused by seismic activities.
If you want insurance coverage for these risks, you need to purchase mudslide endorsement insurance. Another option is to buy a Difference in Conditions (DIC) policy, which covers landslides, mudslides, floods, and earthquakes.
This is found through surplus line programs. Consult your insurance agent or The Insurance Marketplace for coverage details. It is often an expensive insurance option.
In the case of earthquakes and mudslides, although your home may not be covered, your vehicle might be covered. If you have comprehensive insurance for your vehicle, damages caused by earthquakes and floods may be covered.
While windstorms are usually included in standard homeowner policies, certain counties in specific states don’t include this insurance, such as Alabama, Florida, Louisiana, Mississippi, North Carolina, South Carolina, and Texas.
These insurances can be added as endorsements through surplus lines. Check your policy to confirm if you have this coverage.
Sewer backup is not automatically covered in your homeowner’s policy, but many insurance companies offer this endorsement. If you choose to insure against this risk, two types of coverage can be provided.
If heavy rain leads to a sewer pump failure and damages a finished basement, it will be covered under the endorsement but not in the standard policy.
If tree roots grow into your property’s septic line outside and causes backup, flooding your home, this will be covered under the endorsement – but again, not within your standard policy scope.
Catastrophe insurance and hazard insurance cover different types of risks.
Hazard insurance covers volcanic eruptions, tornadoes, and lightning.
Catastrophe insurance covers other events, both natural and man-made disasters, as mentioned before.
Your homeowner’s policy covers hazard insurance but not catastrophe insurance. You need to understand these distinctions to adequately insure your home.
Not reading your insurance policy and understanding exclusion clauses can be a costly mistake. Most insurances, like flood insurance, have a waiting period. You may be caught off guard and powerless.
If you are unsure, contact your insurance agent or company to review your policy together.
This article was originally published on the English edition of The Epoch Times website and does not represent any specified opinion or endorsement. It is intended for general information purposes only, without any recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, real estate planning, or other personal financial advice. The accuracy or timeliness of the content is not guaranteed.