When you purchase a home insurance policy, you generally hope that you will never have to file a claim. Unfortunately, accidents and disasters happen, and you will likely have to file at least one home insurance claim throughout your time as a homeowner.
However, there are moments when a home insurance claim may be denied. It is important to know the limitations of your home insurance policy so that you can avoid denied claims and possibly uncovered damages.
Instances, where your home insurance claim may be denied, include:
The Damage Isn’t Covered by Your Policy
Home insurance policies have frequent exclusions under basic coverage between various providers. If damage to your home or belongings are not on your policy, you may not be covered and a claim would be denied.
First, it is important to note that there are two main types of home insurance policies: named perils coverage and open perils coverage.
Most home insurance policies are named perils policies. These types of policies cover only dangers that are listed specifically on your home insurance policy. Anything not listed should be assumed to not be covered under your home insurance. For example, a basic named perils home insurance policy may include coverage against:
- Fire
- Wind
- Hail
- Lightning
- Smoke
- Explosions
- Theft
- Vandalism
Anything not listed above should be assumed uncovered, although listed perils can change depending on your policy.
On the other hand, open perils home insurance policies are the opposite. Instead of naming what is covered, you will only see a list of exclusions. Anything not listed as an exclusion should be covered under your home insurance policy.
Common exclusions you may find on your home insurance policy include:
- Flood Damage
- Earthquake Damage
- Criminal Acts (By the Insured or Those Living in the Home)
- Intentional Damage (By the Insured or Those Living in the Home)
- Damage or Injuries Caused by Certain Pets or Dog Breeds
Exotic animals such as birds and reptiles are generally not covered under home insurance. Some dog breeds are often excluded, as well, such as Dobermans, German Shepherds, pit bulls, rottweilers, and huskies.
For many of the exclusions or limitations on your policy, you may be able to purchase an endorsement depending on your insurance provider.
You Did Not Reach Your Deductible
Your home insurance deductible is how much you must pay out of pocket when filing a claim before receiving compensation. For example, say a storm causes $3,000 in damage to your home. Your deductible is $500. This means you must pay $500 toward repairs before your insurance provider will cover the remaining $2,500.
However, say a storm only does $300 in damage and your deductible is $500. Since you cannot reach your $500 deductible, you won’t be able to (or want to) file a home insurance claim.
The Expenses Exceed the Limits of the Policy
In some cases, damages will be covered, but the amount of damage will exceed the limits of your policy. For example, say your liability coverage is set at $1 million. Someone is severely injured in your pool, sending them to the hospital to receive multiple procedures. Their family later sues for the damages, and in the end, the costs amount to $1.5 million. While you can still file a claim for $1 million, compensation may be denied for the remaining $500,000. This is why some homeowners choose additional coverage such as umbrella liability insurance. Umbrella liability insurance serves to fill in the gaps left by your general liability insurance on homeowners’ insurance, but it can also expand the liability under your auto insurance policy.
You can also expand your home insurance limits with endorsements. For example, many home insurance policies have limits on certain expensive items such as jewelry, furs, and art. You can purchase jewelry endorsements to add coverage for your expensive items. This way, you can avoid your belongings not being compensated for after an accident.
If you have any questions about what is covered under your home insurance policy, be sure to speak with your insurance agent. No one policy is the same, and it is crucial to have the right policy to suit your budget and your home.
Nonpayment
One of the most common reasons home insurance claims are denied is nonpayment. If you have missed a payment on your home insurance policy, any claim could be denied. If the issue is not fixed, you could even face your insurance policy being canceled.
Fraudulent Claims
Fraudulent claims on home insurance, often known as soft fraud, are those that are less than honest or include inconsistencies. If an insurance provider believes that a claim is not valid, such as exaggerating damages, the claim may be denied. Too many fraudulent claims can also lead to your home insurance policy being canceled.
