Making Cents: Insurance exclusions complicated

With all of the bad weather that we've had around the country this spring, many homeowners are learning about exclusions to their insurance policies. Exclusions are insurance-speak for perils or risks that are not covered.

Most homeowners' policies exclude items like water damage and earth movement. Most people interpret these two perils as floods and earthquakes, but there are more possibilities. Water damage, for example, can include floods, but it can also include sewer backups or seepage to the basement from ground water. Items like frozen pipes or plumbing mishaps are normally covered. Earth movement is typically categorized as an earthquake, which everyone except Californians believe is only a remote possibility. But earthquakes do occur in all parts of the country, and earth movement includes perils beyond earthquakes. Earth movement can also include sinkholes, landslides or mud flows. To have these risks covered, you would need to add a special rider to the policy.

Another common exclusion can come from power failures. Nuclear hazards are also frequently excluded; residents who live near nuclear power plants should know they may need special protection.

If you have a major construction project going on at the home, talk to your agent. Many contractors go “naked'' on coverage, and many others are concerned about protecting their employees, business and equipment - not your home. It may be wise to assess your exposure.

As the homeowner, you are required to take reasonable means to protect your property at all times, including during a time of loss. Neglecting to do so could also result in your coverage being excluded. So if you have huge broken tree limbs dangling from the mighty oaks in your yard, and a hurricane blows them through a picture window, that claim could be denied.

Beyond exclusions, you also need to be concerned with limits. Limits are ceilings, or the maximum that your insurer will pay for certain losses. Common exclusions are applied to valuable home contents, such as artwork, jewelry, furs or a wine collection. You would be wise to consider raising the limits for these valuables through a special rider to your policy.

Find a good financial planner, insurance agent or risk manager, and be sure to know what coverage you have, and what coverage you may need to consider.

John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at jnap@uswealthcompanies.com.

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