Insurance, In(cluded) and Out(of Pocket)

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IF YOU ARE SHOPPING FOR A NEW HOME, YOU ALREADY KNOW (I hope) that a mortgage company requires you to have homeowners insurance. You’ve done your research, figured out your budget, and are feeling like you are ready to tackle home ownership. But there will be a lot of details coming at you, a ton of paperwork, and you may not focus on every aspect of the insurance policy. Who really reads those all the way through, right?

            So let’s talk about what isn’t covered on that policy.

1.      WATER DAMAGE. But wait, I hear you thinking, I remember my parents’ water pipe broke in the wall and their insurance covered it. Absolutely! Any water damage from a pipe or system in the house is covered, *but outside water is not*. This includes sewage backup or overflow, sump pump, or outside drains. If your house gets flooded because a sprinkler got left on or broke, it probably isn’t covered. Even worse, this also includes actual floods! Depending on the issue, you may be able to purchase a separate endorsement. While sewer backup coverage is fairly inexpensive, flood insurance, on average, costs around $700/year and is only available through the government-run National Flood Insurance Program.

2.      EARTHQUAKE. This needs to be purchased as a separate endorsement (addendum) in every state but California. In most states your average home policy does not cover earthquake, sinkholes, or other “earth movements”. While these sound rare, when they occur they are incredibly costly.

*Foundation issues that fall under “earth movements” can include foundational damage due to tree roots, faulty construction, or natural settling, cracking, bulging, or expansion of the foundation.

3.      BASIC MAINTENANCE.  Remember that water damage above? If your roof leaks from regular wear-and-tear, those repairs are coming out of your pocket. Same with things that generally occur through neglect or not properly maintaining your home, such as rodent damage, termites/insects, mold, etc. Anything which can be chalked up to negligence is not covered. Damage caused by smoke or smog from industrial or agricultural operations is also not covered.


So as you are moving forward, keep these things in mind and check costs of additional insurance coverage you may want to purchase to keep your home safe.

            One final caveat; as a first-time homeowner, you may be tempted to go with a low deductible and file a minor claim the moment a problem arises. If you make too many minor claims, that can affect your policy cost later on down the line when it comes time to renew. Choose a larger deductible—one that you can cover from savings, if necessary—and only file for any repairs larger than that deductible. Think of insurance as literally that, insurance for large disasters. Anything smaller, you need to take care of yourself.


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Michelle M Tucker | !Daley Real Estate | GA Real Estate License #297541