Common Homeowners Insurance Exclusions

Buying a home is one of the biggest investments most people will make in their lives. The first thing to do before finalizing the sale is to buy a homeowners insurance policy to help you protect your investment against certain events and losses. Having a reliable home insurance policy is essential and so is understanding what it will cover and will not cover. Just because you have purchased a Home insurance policy does not mean you are protected from every type of loss. Homeowners insurance exclusions are not uncommon, so it's helpful to understand them. You can always consider supplemental coverage to protect you if your home insurance doesn't cover everything.

Exclusion Insurance Definition

Home insurance exclusions are specific types of losses or damage that aren't covered by a standard homeowners insurance policy. If your home sustains damage or loss that is in the exclusions section of your insurance policy, your insurer will not cover the cost of replacement or repairs. You can find most exclusions following the coverage sections in your policy.

What Are Homeowners Insurance Exclusions?

Insurance carriers use exclusions to closely detail what is covered or not covered in your standard home insurance policy — very few will provide coverage for everything. Homeowners insurance exclusions are certain types of loss or damage that your policy will not reimburse you for. In other words, if your house or property sustains damage due to an event listed in the exclusion section of your policy, you will not receive coverage for repairs or replacement.

Exclusions are specific types of losses or damage that aren’t covered by a standard homeowners insurance policy.

Two main types of coverages define covered and non-covered events.

Named Peril Policies	Open Peril Policies
These policies mean you're only covered against the specified perils that your policy has listed. If damage or loss occurs from other perils, you will not be reimbursed.	These policies mean you're covered for any loss or damage except those your policy specifically excludes.

Most exclusions will often come up under named perils, including the following:

Ground Movement
Intentional Loss and Neglect
Government Action
Nuclear Hazard and War
Flooding
Pests and Infestations
Mold
Dog Bites
High-risk Liability
Power Failure
Ordinance
Home-Based Businesses

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Insurance Exclusion Categories, Explained

Ground Movement

As the name implies, any kind of ground movement like mudslides, earthquakes, sinkholes, landslides, and other ground movements that involve the earth rising, sinking or shifting are usually excluded in most states, except Tennessee and Florida, where insurance providers must extend optional protection for sinkholes. Homeowners will need separate coverage for these natural disasters.

Intentional Loss and Neglect (Wear-and-Tear)

Preventable damage and disrepair will not be covered in your insurance policy. If an action needs to be taken to prevent loss and damage, and you do not take action to repair it, then it is considered neglect. If you intentionally allow damage to remain problematic, it is considered an intentional loss. Your insurance carrier will determine that you could have prevented damage to your home or that you intentionally caused it. In fact, you could be in trouble for insurance fraud if you file a claim for damages you were responsible for.

Government Action

This exclusion refers to any act of public authority. If the government pursues an action that results in a loss — like confiscating or condemning your property — it will be excluded from your insurance coverage. Your home insurance policy will not cover the cost to replace or repair your home. The only exception is if the government action occurred due to a named peril.

Nuclear Hazard and War

Any losses sustained from nuclear hazards or war will not be included in your home insurance policy. If you live within the impact zone of a nuclear power plant, they do have their own liability insurance to cover any damages in the event of a nuclear hazard.

Flooding

Flooding can refer to broken sump pumps, sewer blockages, tidal water, groundwater, tsunamis, torrential rain, overflowing rivers and more. These events are not covered by your home policy, but you can get private flood insurance or buy it through the National Flood Insurance Program (NFIP) if you live in a flood-prone area to cover your home. Note that NFIP plans do not cover your possessions, only your home. Most home insurance policies will cover burst pipes.

Pests and Infestations

Most home policies will exclude pests and infestations of insects, rodents, bedbugs, termites and more. Any extermination and sanitation costs would be up to the homeowner. For most insurance carriers, such things are considered upkeep and maintenance, unless the infestation is a result of a covered peril.

Your home insurance policy is designed to protect you against common losses, but it cannot cover every loss.

Mold

Mold damage will only be covered if it is not a result of neglect or long-term water leaks, defective construction or flooding. If burst pipes, a bad storm or plumbing issues result in mold, it may be considered a covered peril.

Dog Breeds

Dog bites are a surprisingly common occurrence and potentially not covered by homeowners insurance for specific aggressive dog breeds. Some carriers may even blacklist certain breeds like Rottweilers, Pitbulls and wolf hybrids.

High-Risk Liability

Some exclusions apply to your personal liability and premises liability coverage. This refers to the sections in your policy that handle property damage and bodily injury suffered by those on your property. For example, standard home insurance policies will protect against things like slipping on ice or breaking a neighbor's window accidentally. High-risk activities that result in damage and injury will likely not be covered.

Power Failure

If a power failure or surge results in loss or damage to your property that was caused by the utility company or if the event took place off your property, it is not covered. However, if you experience a short-circuit fire in your home your insurance will likely cover it.

Ordinance

If your property is not up to standard building code, your insurance will not cover the cost of upgrading your house to meet regulations and building codes. However, it is possible to include a law coverage endorsement or rebuilding ordinance in your policy if you have an older home.

Home-Based Business Claims

Claims regarding business-related home insurance claims can be complex. If you are doing business from your home — for example, a pet washing business or a daycare operation — you may need to invest in business insurance to be covered for certain losses. Just make sure to let your carrier know that you're running a business out of your home right away.

Why Exclude Risks?

Your home insurance policy is designed to protect you against common losses, but it cannot cover every loss. Exclusions don't cover things like catastrophic events (flooding, earthquakes,) wear-and-tear and more. Excluding perils that most homeowners don't typically experience helps insurance carriers keep premiums reasonable and affordable. If you do require extra coverage beyond standard homeowners insurance, you can buy supplemental coverage at an additional cost. For example, if you live in an area that tends to flood, your best bet would be a flood insurance purchase.

Shopping around for homeowners insurance and the right endorsements can save you money and protect you from unexpected losses.

Where To Look for Exclusions

To find what is or isn't covered by your homeowners insurance policy, you'll need to look for the exclusions section. Typically it can be found on pages 11 and 12 of a standard HO-3 policy. While each policy is different, most will contain a list of exclusions. There may also be a section called "limitations," which goes over partial exclusions and defines the scope of coverage for a covered peril.

FAQs

Why are exclusions used by insurers?

Insurance companies use exclusions in homeowners insurance policies to eliminate coverage for specific types of perils or hazards that are either catastrophic or due to neglect and are not common losses to most homeowners.

Policy limitation vs. exclusion?

Policy limitations are different from exclusions. While they are similar in that a limitation also restricts the coverage you receive under specific circumstances, limitations are not as absolute as exclusions. They may place a cap or time limit on the amount of coverage you can receive, for example.

Finding the Right Homeowners Insurance Policy for You

To protect yourself as thoroughly as possible, you should look for a comprehensive insurance policy that fits your lifestyle, budget and needs. SmartFinancial can help you research different insurance policies, including optional enhancements for catastrophic losses like flooding. Shopping around for homeowners insurance and the right endorsements can save you money and protect you from unexpected losses. Just enter your zip code below to start receiving free insurance quotes.

Common Homeowners Insurance Exclusions

Christa Ehrler

Fran Majidi

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