Publication date: 09/18/2009

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Know what your homeowners insurance covers

While it may not have the intrigue of the latest courtroom drama or the emotion of a romance novel, have you read your homeowners insurance policy lately? Most homeowners I know admit that they have never read their policy.

Even worse, they think their policy covers more than it may, which could lead to serious problems if they need to file a claim.

According to Rick Sovel, an independent insurance agent and partner with the Michigan Community Insurance Agency, (248) 465-6200, www.michigancommunity.com, not all policies are created equal.

"I often ask customers if they want a cheap price or good coverage, because a cheap policy isn't so cheap when you find out what isn't covered," Rick said.

In cases of fire, windstorms or even tornados, most insurance policies will cover a homeowner's dwelling and contents. If you accidentally caused a grease fire while cooking in your kitchen, your standard insurance policy should cover those damages. That being said, there are some areas that often are not covered under a standard policy. One of the biggest areas of confusion is water damage.

"If a pipe bursts or a water line breaks, the damage to your dwelling and contents is usually covered," Rick said. "However, if the water damage occurs as a result of a sump pump failure, or a leak in your basement wall, it often isn't covered unless you purchased a rider." A rider is like an addendum to a homeowners policy that covers things that a standard policy may not, or where the standard policy may only cover up to a certain amount. For example, items such as jewelry, furs, antiques or other collectibles may require a rider to provide coverage that is greater than the standard policy coverage.

In the case of a sump pump, it is a smart investment because it often covers if your sump pump has a mechanical failure, you accidently unplug it or the power goes out.

Another issue that many homeowners in Michigan may face is a sewer backup. While a rider can also cover a sewer backup that is the result of a clogged sewer drain, many people assume their standard homeowners policy covers it.

"We see a lot of homeowners who call us to clean up their basement as a result of a sewer backup, and they find out their standard policy doesn't pay for it because they didn't have a rider," said Al David of Emergency Restoration Services in Troy, (248) 299-4500, www.caller1.net.

In the event that the sewer backup has been caused by a problem with a city sewer system, Al said it is best to start with your insurance company first. Often, it comes down to dealing with a city's insurance company to get a claim resolved. In some cases, it requires a class action lawsuit, as was the case in the past when residents sued several Downriver communities for damages caused by a faulty sewer system.

Insurance companies also don't cover flooding caused by heavy rains, overflowing rivers or lakes. If you live in an area that is susceptible to flooding of this type, flood insurance is available through the National Flood Insurance Program administered by the Federal Emergency Management Agency, (800) 621-FEMA, www.floodsmart.gov.

Homeowners insurance coverage for mold is another gray area. Mold by itself, according to Rick, is not usually a covered loss. However, if the mold was the result of a covered item, such as a flood in a basement caused by a burst pipe or a sump pump failure that you had coverage for, then the cleanup of the mold that resulted from this would be covered, but only to a certain sub-limit established in the policy, such as a $5,000, $10,000 or $25,000 limit.

While these are among the more common areas homeowners should be aware of when reviewing their insurance policy, they should also think about other things in their home that may or may not be covered. For example, when the power goes out for a few days, it's not unusual to lose the food in your freezers and refrigerators. Often, cheaper policies don't offer coverage those kind of losses. If it does cover this loss, the limits may be low.

If you can say you honestly know everything about your policy, move to the front of the home improvement class! If you don't know what is, and more importantly, isn't covered in your policy, read it now. Call your insurance agent to answer any questions you have. That's why they're there. Make sure you won't be blindsided if you have a problem that leads to a claim.

Note: This article was accurate at the date of publication. However, information contained in it may have changed. If you plan to use the information contained herein for any purpose, verification of its continued accuracy is your responsibility.

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