Homeowners Insurance Coverage

As with any type of insurance, the only way for a policyholder to know with some certainty what is and what is not covered by homeowners insurance is to examine closely all of the language in the policy. With that important caveat, it is possible to make some generalizations about coverage under a typical homeowners policy.

Direct losses due to lightning, tornadoes, wind storms, and hail are usually covered. In other words, with the notable exceptions of floods and earthquakes, policies cover most natural disasters, or "Acts of God" as they are sometimes called. Commonly covered man-made losses include vandalism and theft. Even when there is protection against these perils, however, the insured person should be certain that any dollar limits on the amount of coverage for specific items correspond to the value of those items.

For flood insurance, including protection against mudslides, a property owner will have to get separate flood insurance provided by the federal government. If property is flooded because of a broken plumbing or heating system in a house, there generally is coverage under a standard homeowners policy. Seepage of water from the ground into a basement, however, is considered a maintenance issue and is excluded from most policies.

Stolen personal property is covered, even if it was located far from home at the time of the theft. Basic coverage only entitles the policyholder to the current value of the property. For additional money, however, a replacement cost endorsement for personal property will take care of the full replacement cost, less any deductible.

Apprehension about being sued is as big an issue for many homeowners as repairing or replacing their own property. The typical policy will pay for damages caused by a homeowner's negligence, as well as the legal costs of defending the homeowner. If the standard $100,000 limit on liability protection is not enough to make the policyholder comfortable, a higher limit can be purchased.

Even the most carefully drafted homeowners policy can leave room for different interpretations, resulting in litigation. For example, Bonnie hired a worker to do some ordinary maintenance on her home. When he jumped from a ladder onto the side porch of her home some support beams gave way on impact. Further inspection revealed extensive, although previously hidden, carpenter ant damage to the side porch, a front porch, and a garage.

Bonnie's insurer denied coverage, except for damage in the area that had collapsed under the worker. The policy covered losses from hidden insects only if they involved the "collapse" of all or part of a structure. Bonnie argued that the term "collapse" was ambiguous enough that it should extend to any substantial impairment of a building's structural integrity. The court disagreed, reasoning that "[t]here are no degrees of collapse." The policy covered only a collapse, not an "imminent" collapse.