Most homeowners eventually figure out their homeowners’ insurance policy doesn’t cover every type of damage to their house or its belongings. Many people don’t even bother to learn about all the pros and cons of different insurance plans because they can’t stand thinking about accidents or disasters. Nonetheless, the more you learn about insurance, the more you can make it work in your favor.
Here are seven surprising facts about homeowners insurance that aren’t widely known:
Claims May Reopen After Receiving Payment
Home insurance claims usually must be filed within a year of a disaster that causes damage. First, your insurance company will send an appraiser to your home to document and assess the damages. Then the insurer will send you a check in the mail to pay for the repairs. However, the claim may not end there, as you may discover further issues requiring repair work after receiving the check. If so, you can reopen the claim, report more damages, and receive additional funds.
Insurers Must Give a Good Reason for Canceling a Policy
Even though insurance companies have the final say as to whom they insure, they can’t just drop a customer or refuse to renew a policy without a good reason. They cannot cancel a homeowners policy that’s been in effect for over 60 days except for the following reasons:
- The customer fails to make the monthly payment.
- The insurer discovers inaccurate information on the application.
- The customer engages in fraud, such as filing an illegitimate claim.
- The homeowner lets the property fall apart or abandons it.
It’s pretty hard to get dropped by an insurance company unless you give them a good reason. Insurance companies want as many target customers as they can get, but people who miss payments or commit dishonest acts aren’t worth the trouble from an insurer’s perspective.
Basic Policies Don’t Cover Floods or Earthquakes
You might expect a basic homeowners policy to cover all the worst disasters imaginable so you can sleep better at night. However, insurance companies are in the business of choosing policyholders who pose the least risks for filing claims, and they put different costs on risks. Thus, higher risks correspond with higher costs.
Floods or earthquakes, for example, can cause massive damage to an entire city. That’s why both disasters are covered through higher-priced add-on insurance. If you buy a home in a region with a history of earthquakes, you’ll pay more for coverage than if you live in an area with minimal seismic activity.
Home renovation is another item that a basic plan may not cover. Some homeowners might assume that any home repairs or remodeling jobs are covered by insurance. The basic policy does pay to restore your home if it’s destroyed by a strong storm, lightning, or fire. Check with your insurance provider to see what types of renovation your plan covers since basic homeowners policies vary among providers.
A Claim May Be Denied Due to Poor Maintenance
Any damage to your property due to improper maintenance will probably not be covered by a basic homeowners insurance policy. Insurers expect homeowners to take proper and regular care of their homes. You should be aware from the onset of the differences between uncontrollable and preventable disasters. Insurers focus on the former when designing basic policies. A basic policy helps pay for storm damage, but not necessarily damage you cause to your own home due to negligence.
Insurers Share Claims History Data
Although different insurance companies compete against each other for market share, most work together at sharing claims information through a large database. The Claims Loss Underwriting Exchange (CLUE) serves the insurance industry by collecting data from 98 percent of insurance agents. These days, a home buyer may request the seller to provide a CLUE report to learn the property’s claims history for the past seven years.
Owning a Dog Makes It Difficult to Get Comprehensive Coverage
Basic homeowners policies typically provide liability coverage if your dog bites a visitor at your home or someone on another property. This coverage usually has limits of up to $300,000. That means if your dog’s bite leads to medical bills higher than that amount, the victim may sue you personally to pay for the balance. Some insurance companies simply won’t sell homeowners’ policies to dog owners, especially if the dog has a history of causing harm. Others charge a higher premium or don’t include coverage for dog bites in their policies.
Homes near Fire Stations and Fire Hydrants Have Lower Insurance Costs
After a while, if you connect all the dots, it will become clear that insurers reward policyholders who reduce risks with lower rates. Living near a fire hydrant or a fire station lowers insurance costs because there’s less risk of your home burning down. You may get a discount on your premium if your home is within 1,000 feet of a fire hydrant. The insurer may take into account factors about the fire department, such as how quick they are in responding to fire alarms. The community water supply is another hidden factor that reflects risks and affects costs.
Use this knowledge to your advantage by making sure your valuable assets are properly insured. Contact us at Schwab Agency to tell us about your homeowners’ insurance needs, and we’ll set you up with the right customized plan.