It’s only apples and oranges, right?
Lately, we’ve been receiving a lot of calls with questions regarding coverage for repairs to home appliances or home systems. Many insureds are not aware that their traditional homeowners policy does NOT cover the replacement cost or even repair of important systems in their home such as electrical, HVAC, kitchen appliances, hot water heaters or washers and dryers due to wear and tear. To avoid confusion, disappointment or frustration, let’s briefly compare the difference between a standard home insurance policy and a home warranty.
First of all, a Standard Home Insurance Policy will provide coverage to your home in the event damage is caused by any of these most commonly named perils; fire, smoke, lightning, windstorms, hail, explosion, vandalism, damage from a aircraft, car or vehicle, theft, or falling objects, weight of ice, snow or sleet, and water damage. As for home systems, there are specific exclusions for mechanical system failures in a traditional homeowners policy unless damage is caused by a named peril listed above. An endorsement known as Equipment Breakdown coverage can help fill that gap. This endorsement can be added to a homeowner’s policy, but keep in mind coverage is applicable to mechanical breakdowns that occur suddenly, not damage that occurs over time. That is considered wear & tear and is not covered. This is where a home warranty is important.
Moving on, we can see that home insurance provides coverage for damage to your home caused by specifically named disasters, then there are Home Warranties. A home warranty is basically a servicing contract that provides repair or replacement of your home systems or appliances inside of your home that fail due to age or everyday wear and tear. They are annual contracts that can be purchased by private companies off of the internet (usually $30/mo). These contracts can be purchased at any time even if your home or appliances aren’t brand new. Even though home warranties are not required, they can certainly be beneficial in rounding out your total home protection and save you $$$ in the long run. Most insurance agents aren’t contracted to sale these types of home warranties, but can be purchased off the internet or offered by your title company.
FYI: Check with your agent to see if your homeowner’s policy offers Equipment Breakdown coverage which can be an affordable alternative or addition to a home warranty (under $80/yr).
Water Damage-The Long & Short of it…
What Is Covered?
A standard homeowner’s insurance policy will likely cover water damage if it’s an accidental discharge or overflow of water from a plumbing, heating, air conditioning or automatic sprinkler system or from within a household appliance (HO3 Special Form). For example, a burst water pipe or water heater and the resulting damage to the walls and flooring may be covered under a standard homeowner’s policy. Water damage from a sink, tub or dishwasher that overflows, may be covered as long as it is sudden and accidental. Coverage may come into question, however, if there is a certain amount of mold which indicates the damage has been occurring over a period of time. So “sudden and accidental” is key, which is why proper home maintenance is very important to avoid any surprises.
What Is Not Covered?
Speaking of surprises, homeowner’s insurance does not cover ALL types of water damage losses. Many homeowner’s are surprised when they file a water damage claim and it is not covered. For example, water entering the home through leaks, cracks and seepage around the home are considered to be the responsibility of the owner and should be prevented through routine home maintenance. Which takes us to a misunderstood peril of flooding…
Floods: Flood damage is NOT covered by a homeowner’s policy. No type of flood damage (inside or outside of the home), no matter the source of the water, is covered. Flooding can occur from storms, saturated ground, overflowing or surging bodies of water such as rivers or ponds, etc. Again, this is not covered under a standard homeowner’s policy, you would need to purchase a separate Flood insurance policy for this.
Rainstorms: Most insurers will not pay for roof leak repairs because this is considered to be a maintenance problem. It would, however, cover the damage inside the home caused by the water damage. If the damage to the roof was caused by wind, hail or something like a falling tree (which are covered perils) then the repairs to the roof leaks would be covered as well as the damage it had caused.
Water backup from an outside sewer or drain: You also will not typically be covered by a standard homeowner’s policy if water backs up into your home through an outside sewer or drain. You would need to purchase additional sewer or back up coverage or endorsement that may help provide protection in case of such an event.
**Please note: this is a basic overview of homeowner’s insurance coverage and exclusions. This is not an authorization or guarantee of coverage. Please review your homeowner’s policy for details.
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No Earthquake Insurance?
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Did you know?
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