What are some examples of unexpected exclusions in a home insurance policy?

There are seven general types of home insurance policies under the industry standard Homeowners 2000 Program, ranging from HO-1 to HO-8 (there is no HO-7) as of 2014. Perils covered under HO-1 policies are very narrow, and they are not sold in all states. HO-2, HO-3 and HO-5 are the types of policies held by most owners of modern houses, with HO-2 providing the most narrow coverage and HO-5 providing the most broad coverage. HO-4 policies are for renters. HO-8 policies are designed to meet the needs of owners of older homes for which the price to replace a building is much greater than its market value. HO-6 policies are designed for owners of condominiums.

HO-2 policies cover 16 distinct perils ranging from fire and lightning to vandalism. HO-3 policies provide protection for all perils to the house except those outlined in the policy and exclude perils to personal property, for which coverage is for a list of named perils only. Perils to a house that are excluded in HO-3 policies include:

• Ordinance or law: when repairs to a home are greater than what was originally present in order to satisfy new or updated building codes.
• Earth movement: damages to a home caused by earthquakes, landslides, sinkholes and mudslides are not covered.
• Water damage: damages to a home that result from floods and leaks are not covered.
• Power failure: many policies have limited coverage for spoiled food as a result of a power failure but do not cover other losses associated with power failures.
• Neglect: if actions that could have reasonably prevented damage from occurring were not taken, then damage is not covered.
• War: damages resulting from war, undeclared war or civil war are not covered.
• Nuclear hazard: damage as a result of nuclear contamination is not covered.
• Intentional loss: damages that have been intentionally caused with the goal of creating loss are not covered.
• Governmental action: damages or destruction that are the result of a public authority seizing or taking any other action are not covered.
• Loss to property: damages caused by faulty workmanship or poor materials are not covered.

HO-5 policies cover all damages to both the house and personal property subject to a list of exclusions outlined in the policy.

Other events for which homeowners may not be sure if they are covered or not include:

• Loss of market value: if a rendering plant opens in the neighborhood and house prices fall, this is not covered in a standard policy.
• Pollution by nearby business: if a paint company spills paint into a nearby creek, which contaminates a well, this is not covered.
• Home businesses: businesses, especially those which see clients visiting a home, need more commercial liability insurance and are not covered under standard homeowner policies.
• Homes falling off eroding cliffs: these damages are not covered by standard policies and require additional coverage.

Every situation is different, and insurance agents can answer questions about what is and is not covered. Homeowners who have any doubts should ask their insurance agents. While many perils are not covered by standard policies, there are many instances where riders or additional policies may be purchased to firm up specific coverage.

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