What's covered, what isn't, and how to find out before you file a claim
Your home insurance policy has a section called "exclusions." This is what it won't pay for. Most people never read it, which is exactly how insurance companies prefer it.
Here are the categories that will shock you:
Your roof leaks because it's 15 years old? That's maintenance, not a covered loss. Insurance pays for sudden, accidental damage, not gradual deterioration. So that water damage from a slowly failing roof? You pay for it.
Gutters clogged for months? Foundation cracks from poor drainage? Mold from humidity? These are all your responsibility. Insurance doesn't cover problems that stem from lack of maintenance.
Termites, rodents, carpenter ants, bed bugs, your policy excludes them. The damage they cause? Also excluded. This can add up to thousands in structural repairs.
Your house burns down. You rebuild it, and the new building code requires updated electrical wiring, stronger roof trusses, and better insulation. Your policy covers the replacement cost of what you had, not the code-compliant version. You cover the gap.
Many homeowners think they're covered for things they're not:
| What Homeowners Think Is Covered | The Reality |
|---|---|
| Damage from a tree falling on the house | Covered if the tree fell from outside the property. If it was your dead tree? Exclusion applies. |
| Burst pipes and water damage | Covered only if from sudden freezing. Gradual leaks? Not covered. |
| Damage from a sewer backup | Usually not covered unless you add a rider. |
| Stolen packages from porch | Not covered. Items have to be inside the dwelling. |
Most standard homeowners policies exclude damage caused by normal weather events that don't rise to the level of a named peril. Windstorm damage? Usually covered. Steady rain damage? Maybe not. It's this gray area that causes disputes.
The real lesson: Call your agent and ask them to walk you through the exclusions section of your policy. Ask specific questions: "Is my roof covered if it fails from age? Are burst pipes covered? What about sewer backups?" Get answers in writing.
Here's a fact that surprises almost everyone: standard homeowners insurance does not cover flood or earthquake damage. Not in any state. Not under any condition. This isn't an oversight, it's intentional.
Insurance companies base premiums on the predictability of claims. Floods are unpredictable, expensive, and catastrophic when they occur. If a major flood event happens, dozens of claims hit at once. Premiums couldn't possibly be high enough to cover that risk.
That's why the federal government created the National Flood Insurance Program (NFIP). If you live in a flood zone, you're required to carry flood insurance if you have a mortgage. If you don't live in a high-risk zone, you can still buy it, but most people don't, and that's usually a mistake.
Same logic. Earthquakes are rare in most of the country but catastrophic when they occur. The risk is concentrated in specific zones and impossible to predict. Standard insurance won't touch it.
If you live in California, Oregon, Washington, or any seismic zone, you need earthquake insurance. It's a separate policy, and it's worth getting if you have significant home equity.
Flood insurance is offered through the NFIP or private insurers. Cost depends on flood risk. A house in a low-risk zone might pay $300–500 per year. A high-risk zone could be $1,000+.
Earthquake insurance is a rider or separate policy through your insurer. Cost depends on your location and home value. In California, expect $500–1,500+ per year for typical coverage.
Both feel expensive until you need them. Then they feel like the best money you ever spent.
Your policy may call flood and earthquake "acts of God." That phrase doesn't mean "we'll cover it." It means the opposite. It's the policy's way of saying, "We're not responsible for this."
After a loss, your insurance company will ask for proof of what you owned. "I had a TV in that room" doesn't count. You need evidence.
Most people discover this too late. They've lost everything in a fire, and now they have to remember what was in the house. It's impossible. The insurer denies claims because you can't prove the items existed.
The fastest way to document everything is a video walkthrough of your home. Here's the process:
When you file a claim, the video becomes evidence. The insurance adjuster can see your couch, your TV, your belongings. Combined with purchase receipts, it's almost impossible for the insurer to deny the claim on the basis of "we don't believe you owned those things."
Pro tip: Store your video and spreadsheet outside your home. If your house burns, you need that documentation to still exist. Cloud storage is free and solves this instantly.
Jewelry, art, collectibles, and expensive electronics often have limits in your basic homeowners policy. If you have valuables, ask your agent about a "scheduled personal property" rider. It costs a bit more but removes the limits on specific items, provided you can document their value with receipts or appraisals.
This is the decision that determines whether insurance compensates you fairly or leaves you short.
Actual Cash Value (ACV) = What your stuff is worth today, after depreciation.
Replacement Cost Value (RCV) = What it would cost to buy new versions of your stuff today.
They're vastly different.
Check your policy. If it says you have "replacement cost coverage" for personal property, you have RCV. If it says "actual cash value," that's ACV.
Most people think they have RCV but have ACV. It's a major source of disappointment after a claim.
RCV is almost always better, but it costs 15–25% more in annual premiums. Here's the trade-off:
| Factor | ACV | RCV |
|---|---|---|
| Annual Premium | Lower (~$1,000–1,500) | Higher (~$1,150–1,875) |
| After a Loss | You're significantly undercompensated | You're made whole |
| Break-Even Point | N/A (you always lose money) | After a significant claim, usually within a few years of extra premiums |
Recommendation: Get RCV for personal property, even if ACV applies to the structure of your home. Personal possessions depreciate quickly, and ACV will hurt you.
You also choose a deductible ($500, $1,000, $2,500, etc.). Higher deductible = lower premium. If you have an emergency fund, a higher deductible is often worth it. If you don't, stick with $500–1,000.
You don't need an insurance degree to audit your coverage. You need two hours and your policy.
In almost every case, people are under-insured in one or more areas. Common findings:
Increasing dwelling coverage from $300,000 to $350,000 might add $30–50 per year. Adding an umbrella policy might add $150–200 per year. These are rounding errors in the context of your home's value. If the uninsured loss happens, you'll regret not spending those dollars.
Make a plan. Prioritize the changes that matter most:
Your agent can usually make these changes with a phone call or online update. The cost increase is usually modest, and you'll sleep better.
The Home Binder has a Home insurance worksheet: what your policy covers and leaves out, the video walkthrough checklist, and what to fix at the next renewal.
The Home Binder covers the house: who to call, where things shut off, and a record for every appliance. Print the whole thing or just the page you need, and fill in what you know. The blanks that are left are your list of what to go find.
Download the Home Binder (PDF)Paper goes stale, and that is the one problem no binder solves. Hubstone holds the same record and keeps it current, so a changed phone number or a renewed policy updates once instead of in three places.
General information, not legal, medical or financial advice. Requirements differ by state.