Home Insurance Loopholes - You May Not Get What You Think You're Paying For

If you have home insurance, it is likely that your plan is a standard one that resembles most home insurance plans around the country. Generally, it will most likely cover structural damage to your home and other structures on the property (such as a shed or garage), personal injury liabilities you incur if someone is hurt on your property, damage to objects you store in your home, and extra costs of living that you might incur if your home becomes uninhabitable.

These basic home insurance plans, however, are not without loopholes. Certain events that may fall under one of the categories listed above may not be covered if the cause is one that the insurance company specifically excludes.

Unfortunately, most people are unaware of home insurance loopholes until it's too late and they are trying to get reimbursement for a claim.

Some Common Home Insurance Loopholes

A common loophole in your home insurance plan has to do with structural damage caused by termites.  Perhaps you just learned that the foundation of your home has been destroyed by termites and needs to be replaced.  Most insurance companies will not cover this because the termites were most likely there before you purchased your home.

 

Another loophole has to do with coverage of your personal belongings.  You need to make sure that your home insurance policy covers personal effects in the first place.  Many policies do not.  Even if your homeowners insurance policy does cover personal property, people who have lost everything due to a disaster are shocked to find that the insurance company will not reimburse them because they could not produce receipts for their personal property. Sometimes the home owner did have receipts, but the receipts were destroyed along with the home. For this reason, it is extremely important to document each and every personal item in your home with verifiable dated photographs and, if possible, receipts.  Write down the serial numbers and other identifying information and then place this inventory, along with the receipts and photos, in a safety deposit box at the bank or in a fireproof and waterproof safe at your home.  Going through your house and videotaping the contents of each room is also a good way to document your personal items.

Because natural disasters such as flooding or fire are "expected" in some regions, there may be exceptions in the home insurance policy that would specifically exclude insurance coverage.  For example, claims for damage to homes in a flood plain area resulting from excessive rain might not be honored. However, if that same home gets flooded because the pipes break, then the damage to the personal belongings and home will be covered.

Some Unusual Loopholes in Homeowners Policies

There may be some odd or usual loopholes that you would never expect in your homeowners policy.  Some friends of ours found their community in the midst of a huge wildfire a couple of summers ago.  Their home was located within a national disaster area.  While the wildfire did not destroy the home, the roof collapsed from too much fire retardant being dropped onto the house by the firefighters' bomber plane.  The house was virtually destroyed and uninhabitable; however, the insurance company refused to honor the claim, arguing that the damage was not caused by "an Act of God."  Needless to say, this matter is now in the hands of lawyers.

Conclusion

Make sure you read the fine print in your home insurance contract carefully and consider possible loopholes. If you are in serious doubt, talk with your lawyer and have him or her review the policy for you.  If necessary, you might need to purchase some additional policies that would cover the areas that are excluded in your home insurance policy.  Be sure to talk with your lawyer about this first.

"Home Insurance Loopholes - You May Not Get What You Think You're Paying For" contributed by Urbain C. Beck