5 Things That Are NOT Covered By Your Insurance

Understanding what is covered under your homeowner's insurance policy is almost as important as knowing what is not. Following are five things most people do not realize are significantly limited or not covered by their homeowner's insurance policy.

1. Flood
Massive property damage along the Gulf Coast from Hurricane Katrina serves as a somber reminder: Homeowner's insurance policies do not cover flood damage. Flood insurance must be purchased separately. Depending on where you live, the coverage may be purchased through the National Flood Insurance Program (NFIP).

According to the NFIP, 30 percent of property damage claims caused by flood occur outside of designated flood zones. Valuable information about flood insurance can be found at the NFIP's website: www.floodsmart.gov.

2. Motorized Vehicles
Homeowner's policies do not cover property losses to motorized vehicles, including automobiles, motorcycles and all–terrain vehicles (ATVs)–nor do they cover damage resulting from the use of these vehicles. Such damages may include bodily injury to a passenger or damage to someone else's property.

Solution: Potential losses to or resulting from motorized vehicles should be covered by endorsement on your home policy or by purchasing a separate policy.

3. Freezing Pipes
One of the most common causes of loss to property is water damage that results from the bursting of a frozen pipe. Broken pipes can lead to significant structural damage as well as damage to personal property such as furniture.

Remember that you have a responsibility to a) maintain heat in the building; or, b) if you'll be away for a while, shut off the water supply and drain systems and appliances of water. If you can't prove you've done one of those two things, and a pipe bursts, resulting damage is not covered.

4. Identity Theft
According to the FBI, identity theft is the most pervasive white collar crime in America. While some homeowner's insurance providers have begun to address the significant expenses involved in regaining one's identity, many have not; often capping coverage at small amounts, such as $500.

Good news: The insurance industry has developed ways to help consumers offset potential financial ruin. Losses resulting from identity theft can be covered by endorsement to your home policy, purchasing a separate policy, or other resource, such as a credit card provider or bank.

5. Business Use
The U.S. Bureau reports that more than 40 percent of Americans work from home, many of which operate some kind of business. A homeowner's policy contains limited coverage for property used in the business, such as office equipment. Most liability coverage for the at–home business, such as an injury to a customer or salesperson, also is excluded. Also not covered: professional liability claims, such as faulty advice provided by a financial advisor or a CPA who fails to adequately prepare a tax return.

Business–related losses can be severe. Equipment and inventory can be expensive. Liability claims can be related to defective products, defective work, or failure to maintain a safe environment for the public. What to do? Limited business coverage is available as an endorsement to the homeowner's policy; however, a separate business policy usually is recommended.

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