What Homeowners Insurance Does and Doesn’t Cover
If you’re ready to buy a home in North Carolina, it’s important to understand the ins and outs of homeowners insurance. While these policies are meant to provide financial protection against damage, theft and personal injury, there are some nuances to consider.
This is especially important if you live in an area of North Carolina prone to natural disasters. Peoples Bank can help you understand what’s covered and what’s not, and when it makes sense to purchase additional insurance coverage in North Carolina.
What Does a Typical Homeowners Insurance Policy cover?
Homeowners insurance generally covers the following three things: damage from many (but not all) natural disasters, theft of your personal belongings and liability if someone is injured on your property.
What’s Not Covered in a Standard Homeowners Policy?
- Natural Disasters: Most policies cover damage from fires, lighting, tornadoes, snow and ice and certain water damage. Your policy may also cover damage from explosions, riots, falling objects, smoke, vandalism, vehicles and electrical currents like downed power lines. Be aware that there are often caveats. While water damage from burst pipes may be covered, damage from floods may not. Read your policy details carefully and remember, the extent of your coverage depends on your state and policy.
- Personal Property: Homeowners insurance can help you recoup the cost of personal property that’s damaged or stolen from your home. What’s covered and the amount of coverage will vary, so it’s important to review your policy closely. The value of your property will be paid out to a certain limit, known as your limit of liability. You can often expand this coverage by purchasing riders, or endorsements. Note that some policies will assess your property and pay out current market value, which can be less than the purchase price if depreciation is a factor.
- Dwelling & Structural Protection: It’s important to understand the parts of your home that are covered in the event of structural damage. Typically, homeowners policies cover damage to the foundation, walls and roof, along with attached structures like garages and decks. This is known as dwelling protection. Your policy will also include structural protection. This may cover other structures on your property, such as detached garages, sheds and fencing. Bear in mind that the cause of damage will also impact the coverage you receive.
- Liability Protection: Your homeowners policy provides financial protection if your family members or pets injure another person or damage someone else’s property. It also provides coverage if someone gets hurt on your property. If a guest trips and falls on your front steps, for example, liability protection will cover the cost of any medical or legal expenses, up to a certain amount.
A good rule of thumb is to assume coverage only extends to the items and scenarios defined in your policy. If something isn’t specifically mentioned, chances are, it’s not covered. You should also be aware of your liability limit, which indicates the maximum coverage you’ll receive. If your limit is $100,000, your policy will pay out $100,000 and you’ll be responsible for any additional costs.
It’s important to read the fine print and pay attention to what’s covered and excluded, especially if you live in an area of North Carolina prone to natural disasters. Damage from earthquakes, floods and tornadoes is typically not covered, but you can purchase separate catastrophe insurance. This provides financial protection from other natural and manmade disasters. Here are a few common exclusions that may require additional policies or riders to extend your homeowners coverage.
- Flood Coverage: Flood coverage can be nuanced. Floods caused by internal problems, like leaking pipes and overflowing toilets, are often covered by your homeowners policy. Floods caused by external incidents, such as natural disasters, burst dams, seeping groundwater and sewer backups, generally are not covered. It’s smart to consider separate flood insurance since North Carolina has been significantly impacted by floods in recent history. Some mortgage lenders may actually require it, depending on how close you are to a flood zone.
- Earthquake Coverage: This includes any kind of earth movement, such as earthquakes, landslides, mudholes and sinkholes. It’s wise to consider a separate policy, especially if you live in an area susceptible to damage.
- General Liability: Your liability limit caps the amount of money you’ll receive in the event of personal injury or property damage. A personal umbrella policy can supplement your homeowners insurance by increasing your coverage amount. This is worth considering if your total assets are valued at $1 million or more, or if your property is considered high-risk. High-risk properties are typically older homes and those in high-crime or disaster-prone areas.
- Neglect or Lack of Maintenance: Damage from neglect or lack of maintenance is typically not covered. This means the cause and type of damage are both considered when determining whether your policy will pay out. Mold damage, for instance, might be covered if it’s the result of a burst pipe or another accident. It may not be covered if your insurance company determines it could have been prevented with routine maintenance, like regular cleaning and dehumidifier use. Take proper care of your home to minimize preventable damage—and your out-of-pocket expenses.
- Sewer Backups: Most homeowners policies don’t cover sewer backups, but coverage can often be added as a rider, or endorsement, to your policy. Because sewer backups can cause thousands of dollars in damage to your home, it’s wise to consider adding this coverage.
- Valuables: Your homeowners policy may not provide enough coverage to protect high-value items like expensive jewelry and original artwork. You can get these items appraised and either purchase a rider or increase your limit of liability.
- Cars: While homeowners insurance covers most of your personal property, it’s important to note that your car is not included. You’ll typically need separate auto insurance to provide financial protection if your car is damaged or stolen. Homeowners insurance may, however, extend coverage to items within your car.
What’s Sometimes Covered by a Homeowners Insurance Policy?
Because coverage can vary by location and policy, it’s important to read the details. Coverage may or may not apply to North Carolina windstorms, trampolines and fencing damage due to lack of maintenance, termites or mold. Plumbing may only be covered if damage is sudden or abrupt. For instance, if a leak goes undetected for years and a pipe finally bursts, your policy may not pay out.
Coverage for aluminum wiring is also complex. Many policies won’t cover damage from a fire caused by aluminum wiring, unless the wiring was modified by a licensed electrician. Pool damage is covered only if it’s the result of a natural disaster outlined in your policy (known as a “covered peril”).
When it comes to dog bites, your coverage may depend on the breed. Most policies will provide coverage if your dog bites someone; however, breeds like pit bulls, Doberman Pinschers and German Shepherds may be excluded. If you have a dog, it’s wise to check your policy details. Remember that insurance will only provide coverage up to your limit of liability.
As with any insurance policy, you’ll have to meet your deductible before homeowners coverage kicks in. This means you’ll pay out of pocket up to a certain amount. Double check your policy details and choose your liability limit carefully. Keep in mind that not all policies will cover the full replacement cost of a damaged or stolen item and may only pay fair market value. This is based on an assessment and accounts for depreciation.
Homeowners insurance can be complex, but you don’t have to navigate the process on your own. Peoples Bank can help you understand the ins and outs of your policy and determine whether you need additional coverage to protect your home and your family in North Carolina.
Contact one of Peoples Bank’s experienced representatives to get started.
This Peoples Bank article is for information purposes only and does not constitute financial advice.