The 5 Most Misunderstood Perils in Home Insurance Coverage


Insurance can often be confusing, hard to interpret, and misunderstood. Hello I’m Chip Fridrich and today I will review five of the more common perils in the homeowners insurance world that fit into this category. Understanding your insurance policy is important. The fact is, most insureds do not read their policy or fail to ask their agent if they have questions. In turn, simple assumptions can be made as far as coverage is concerned and that is not prudent.

Let’s dive into the five that I have as being the some of the more misunderstood in my nearly thirty years of experience in the insurance industry. Some may be obvious, but a few may surprise you.

The first is earthquake coverage. It is worrisome to me how many insureds in the marketplace actually think they have this coverage and they don’t. Coverage for earthquake or earth movement has to be added as an endorsement to your homeowners policy unless it is included automatically – and this is done by very few carriers. Customers in areas where seismic activity is prevalent know about earthquake coverage, but not everyone in those areas buys it. If you have earthquake coverage, it will be listed on your policy in plain English on the declarations page.

Number two – sinkhole coverage. On some policies, coverage for sinkholes is automatically included but only up to a certain limit. Some carriers make you add the coverage on as an endorsement and it is not included on the base policy. If you live in an area that has alluvial soil or has a history of sinkholes you need to check your policy or call your agent. In some areas of the country, there are no issues with sinkholes. In other areas it is a prevalent problem. Again, if this is a concern to you, check your policy.

The third most misunderstood peril is coverage for mold. Mold is a big issue in warm and moist areas of the country. Those two combinations can prove to be a powder keg for mold growth. Most companies have coverage for mold, but the total amount that would be paid is limited to a fixed dollar amount – otherwise known as a limit. Some insurance carriers will allow you to increase this coverage for an additional premium, but it will never be the full amount of your home’s replacement value. If you are concerned about mold, know your policy limit for this coverage because there are many insureds who think they have way more coverage than they actually do.

Misunderstood coverage number 4 is coverage for back up of sewers and drains. This coverage is often left off or very limited by many less expensive insurance companies that are out there in the market, and I have seen many customers up in arms that their claim was denied. If a sewer or drain backs up into your home, things can get really messy really quickly and the damages can run into the thousands of dollars. If you are concerned about this type of peril, make sure you check into weather you have the proper coverage.

Finally, the most misunderstood peril in the insurance industry without a doubt is the coverage for flood. There are multitudes of people across the country who are confident that their home policy would cover their structure and contents if a flood occurred and unfortunately they are wrong.  In almost all cases, a separate flood policy is required for a residence to have flood protection. Most of these policies are underwritten by the National Flood Insurance Program. The policies themselves, however, are serviced by a handful of insurance carriers on behalf of the NFIP. The majority of consumers who have flood insurance have it because their lender made them get it as a part of qualifying for their mortgage. Thirty eight percent of all flood occurrences, however, happen in areas that are not considered active flood zones. Rates vary depending on the zone your home is in, but it makes very good sense to obtain a quote for your peace of mind. The term “flood” covers many definitions so if you have any concern of flooding where you live you should consider purchasing a flood policy.

I hope that you are gained some insight into some of these coverage misunderstandings. Should you have any questions, please contact our agency. We would be happy to review your current insurance plan – including your automobile and liability coverages – and check for any gaps in coverage that you may have. While we sell insurance products every day, it is our goal first and foremost for you to have an understanding about your plan – that’s why we are here.


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