What Homeowners Policies Do and Don´t Cover

By Hamza HAsnain

Most Policies Cover Losses Caused by	Most Policies Do Not Cover Losses Caused by
Fire and lightning	Flooding
Aircraft & vehicles	Earthquakes
Vandalism and malicious mischief	Termites
Theft	Insects, rats, or mice
Explosion	Freezing pipes while your house is unoccupied (unless you turned off the water or heated the building)
Riot and civil commotion	Wind or hail damage to trees and shrubs
Smoke	Losses if your house is vacant for 60 days or more
Windstorm, hurricane, and hail	Wear and tear or maintenance
Sudden and accidental water damage	Water damage resulting from continuous and repeated seepage

Companies may exclude coverage for certain losses. For example, if you live on the Gulf Coast, you might receive an endorsement that excludes coverage for wind and hail damage. In areas with a history of hail storms, some companies provide only actual cash value coverage for roofs instead of full replacement cost. Actual cash value pays for damage minus depreciation on the roof, depending on its age and condition.
Most policies will not cover mold remediation beyond that necessary to repair or replace property damaged by a water loss otherwise covered by the policy. The HO-A policy offers no coverage for mold remediation or for damage caused by water leaks, although some companies may offer coverage for sudden and accidental water leaks as an endorsement to the base HO-A policy. Some of the other approved policy forms also cover sudden and accidental water leaks, while others may not. Read your policy or ask your agent whether your policy covers water leaks and mold remediation.
Insurance companies are required to offer you mold remediation coverage. Depending on the company, this coverage will be offered in dollar or percentage increments up to 100 percent of your policy´s limits. If you have questions or concerns about how a mold claim is being handled, or if you need information about how to minimize mold losses, ask your insurance company for a set of guidelines regarding mold claims.


Other Residential Policies

• Renters: A landlord´s insurance does not cover a renter´s personal property. Renters insurance covers your belongings, provides liability protection, and pays extra living expenses if a fire or other disaster forces you to move temporarily from your rented home.
• Condominiums: Condominium insurance matches the benefits of renters insurance, and also covers damage to improvements, additions, and alterations to the condominium unit.
• Townhouses: Townhouses may be insured by either an individual homeowners policy or an association master policy. If a townhouse is owner-occupied and the townhouse association does not have a master policy on the building, you can purchase a homeowners policy on your individual unit. If the association has a master policy, you should get a Texas tenant homeowners policy to insure your personal property.
• Mobile homes: Mobile homes without wheels and resting on blocks or a permanent foundation qualify for a homeowners policy. However, most mobile homes are insured by a mobilowners policy. A mobilowners policy is actually an auto policy that covers mobile homes used as residences. Mobilowners policies offer extremely limited coverage.
• Farm and ranch owners: Farm and ranch owners policies insure homes outside city limits on land used for farming and raising livestock. You can pay extra and get coverage for certain farm equipment and outbuildings.

Maintain Adequate Coverage

Buy enough coverage to avoid a major financial loss if your home is severely damaged or destroyed. This means keeping a realistic dollar amount of coverage on your house.


Replacement Cost Coverage of Your House
The standardized HO-B and HO-C policies provide replacement cost coverage for your house, up to your policy´s dollar limits. Replacement cost is what you would pay to rebuild or repair your home, based on current construction costs. Replacement cost is different from market value. It does not include the value of your land. If you are not sure of the amount it would cost to rebuild your home, your company or agent usually has construction cost tables to help you figure the cost.
To receive full payment (minus your deductible) for a partial loss, such as a hail-damaged roof, you must insure your house for at least 80 percent of its replacement cost. If you insure your house for less than 80 percent of the full replacement cost, the insurance company will pay only part of the expense of a partial loss.
Unless you buy an endorsement increasing your coverage, HO-A policies only provide actual cash value coverage. Actual cash value is the replacement cost of your property minus depreciation. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild it.
If you have an HO-A amended policy or an approved alternative policy, read your policy carefully to know whether it offers replacement cost coverage or actual cash value coverage.


Your Policy´s Dollar Limits are Important
If you insure your house for $100,000, that´s the most you will get if it is destroyed, even if it would cost more to replace it. The Declarations Page on the front of your policy shows how much coverage you have. Talk with your agent or company representative if you have any questions about your insurance limits. If a fire destroys your home, Texas law requires the insurance company to pay the full amount of the policy - even if this amount is more than the replacement cost.
Don´t wait until you have a claim to learn your policy´s limit.


Coverage for Your Personal Property
HO-B policies automatically cover household contents - furniture, clothes, appliances, etc. - up to 40 percent of the amount your house is insured for. This means if you insure your house for $100,000, its contents are insured for up to $40,000. You can get more coverage by paying a higher premium. However, this automatic coverage pays only the actual cash value of damaged, stolen, or destroyed household goods. Actual cash value is an item´s replacement cost, minus depreciation.
You may be able to pay extra and buy replacement cost coverage that ignores depreciation and pays for a new item like the one you lost.
Replacement cost coverage gives you more protection than actual cash value coverage. The following example illustrates why: A burglar steals your six-year-old television set. With actual cash value coverage, you get only what you would expect to pay for a six-year-old television set. With replacement cost coverage, the insurance company pays to replace your TV with a new set similar to the stolen one.
Companies generally want proof you replaced an item before paying your claim in full. However, if you have an HO-B policy, the company must advance you the first $1,500, plus the depreciated value of any other damaged property, without requiring proof of replacement. After that, the company must pay you within five business days after receiving proof you replaced, restored, or repaired the property. A company can offer to replace the items instead of paying cash, but the choice is yours.


Inventory Your Property
Many people learn after a fire or storm that they didn´t have enough personal property coverage. Making an inventory will help you decide how much insurance you need. It also will simplify claims.
Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place.
Homeowners insurance on certain items like jewelry and furs is limited. You may be able to buy more coverage for an extra premium.