Extreme weather and your homeowners insurance: what you should know

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Extreme weather and your homeowners insurance: what you should know

If you've gone to the trouble of saving for a down payment, taking out a loan and buying a house, you might as well take the necessary steps to maintain it. Much like with anything that takes time to acquire, it's foolish to build towards something you aren't willing to protect.

Unfortunately, safeguarding your home against unexpected calamity isn't as simple as just buying a homeowners insurance policy. What homeowners insurance actually covers will vary from policy to policy, and many policies fail to cover one of the biggest risks your home can face: extreme weather.

What homeowners insurance typically won't cover

  • Water damage: Water damage can cause anything from a ruined carpet to toxic mold. The latter has been responsible for huge claims, making insurers more strict about covering water damage. Claim limits for mold vary wildly. In a study done by insurance expert and University of Minnesota professor Daniel Schwarcz, one-third of insurers didn't cover anything for mold while the rest paid between $2,500 to $50,000 worth of damage. Don't assume you're safe in an area with low flooding risk - many water damage claims come from a malfunction or break in the plumbing.

  • Flood: Flood coverage is usually available as an extra rider, and costs differ depending on if you're in a high-risk area or not. Prices range from $400 to more than $2,500 if you live in a region likely to have flooding.

  • Sewer: Sewer backups happen frequently during heavy rains, but replacement sewers are not often covered in a basic policy. Adding in $20,000 worth of coverage for a sewer can cost as little as $50 a year, but may save you a huge headache later. Homeowners with sump pumps should put extra consideration into upping their coverage.

  • Hurricane: Damage from rain caused by hurricanes is generally covered. In fact, most policies tend to cover rain that damages property as it's coming down, but not when it's already reached the ground and starts to flood. This is one area where coverage lines can start to blur.

  • Earthquake: California residents and others who live in earthquake-prone areas can add earthquake riders to their homeowner's policies, as these are usually not covered. Obviously most US residents can ignore this particular type of coverage, but anyone in an earthquake-prone area should take heed. Even if the risk is slim, the damage caused by earthquakes can be catastrophic.

  • Termites, lack of maintenance, etc: Nowadays many insurance companies refuse to cover damage caused by a lack of maintenance by the homeowners. Take steps to avoid this by getting minor bugs and pests taken care of before they become a major problem.

Look closely at your policy

The first step to figuring out if your policy is the right fit is to read through and understand what it says. Depending on where you live, you may need to buy additional coverage for special risks, and pricing can vary between policies. For example, if you live in a flood-prone area but the rider for coverage is prohibitively expensive, you may want to shop for quotes from other insurers.

Buying multiple riders from the same provider can give you a discount; if you're still unhappy with the price, don't be afraid to see what else is out there. Getting at least five quotes can give you a holistic look at what insurance providers can offer in your region.

For those living in areas that experience consistent severe weather events, adding storm-protection upgrades like storm-proof windows or wind-resistant garage doors to your house can decrease your premiums while shielding you from more damage.

Finally, make sure you understand how replacement coverage works for homeowners insurance: not every policy will cover your belongings as well as the actual house, so you'll need to make sure the policy offers a level of replacement coverage you're happy with and can afford. Talk with your agent about how much coverage you're actually buying, so you aren't surprised if your insurance provider only provides partial replacement value.