Hidden Policy Exclusions that Could Torpedo Your Insurance Claim

You buy insurance to protect your property. But what happens if an insurer says ‘no’?

Insurers deny millions of claims each year because of exclusions.

You may have experienced legitimate damages. Your house may be destroyed. However, exclusions limit your ability to receive fair payment.

There are obvious policy exclusions – insurance doesn’t cover wear and tear, for example.

There are also less obvious exclusions – like termite damage and mold.

Unfortunately, insurers often use exclusions to deny legitimate claims. Today, we’re highlighting how these exclusions work – and how to ensure fair treatment.

Common Policy Exclusions

Exclusions play an important role in the insurance system. They prevent insurers from covering damage that should not be covered.

Common exclusions are things like:

• Fraud and intentional damages
• Wear and tear
• Mold damage

If you have a 30-year-old roof that’s partially collapsed, for example, then your insurer won’t cover the cost of a brand-new roof simply because the latest storm knocked it down.

Similarly, you can’t deliberately destroy your property and expect insurance to cover damage. That’s fraud, and every insurance policy excludes intentional damage.

Hidden Policy Exclusions

Most homeowners and business owners are aware of the exclusions above.

However, there are plenty of less obvious policy exclusions:

Damage from Rising Floodwaters or Sewer Backups

If water rises from the ground and enters your home, it’s generally not covered.

All standard homeowners insurance policies exclude flood damage and sewer backup damage.

If the sewer backs up – say, during a period of heavy rain or due to a clog outside of your control – then insurance won’t cover the cost of repairing or restoring your property.

Similarly, if rising floodwaters damage the lower level of your home, your insurance won’t cover it.

Solution? Shop for add-on policies – like sewer backup coverage or flood insurance coverage. Many insurers work with FEMA’s National Flood Insurance Program (NFIP), which offers flood insurance in communities prone to flooding. You buy this coverage through your ordinary insurer.

Termites & Pests

Termites can destroy a home in just a few months when left unchecked.

Unfortunately, many homeowners discover termite damage only after it becomes significant.

Making things worse, insurance doesn’t cover termite or pest damage. It’s considered preventable. As the homeowner, it’s your responsibility to maintain your property, and keeping out pests is part of that responsibility.

Solution? Work with a local termite or pest control company to secure your property. Put your home under a termite bond, if necessary or available. Check your property regularly for signs of insects, termites, rodents, or other infestations. Check attics and crawlspaces.

Wind, Hail, and Hurricane Damage (In Certain Wind-Prone Areas)

For most Americans, wind and hail damage is covered by a normal homeowners insurance policy.

However, homeowners in wind-prone regions of the country – the areas that need wind and hail coverage the most – often face exclusions or special deductibles.

If you live in the following areas, then you may need to purchase extra wind and hail coverage or pay a special hurricane deductible to protect your property:

• Tornado Alley states (including Texas, Oklahoma, Kansas, and Nebraska)
• Certain midwestern states
• Coastal areas of the southeastern United States (say, from the Carolinas all the way to Texas)

In many of these states, insurers introduced special hurricane insurance deductibles after Hurricane Katrina in 2005. Even if wind and hail damage isn’t excluded, you could pay a much higher deductible – say, 5% of the value of your home instead of a flat deductible of $2,500.

In other states, insurers exclude wind and hail damage entirely, forcing you to buy a separate policy. In North Carolina, for example, homeowners buy wind and hail coverage through the North Carolina Insurance Underwriting Association (NCIUA). Without this coverage, you’re not covered for hurricanes, windstorms, or hail.

Today, 18 states have some type of named storm or hurricane deductible, including Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas, and Virginia.

Solution? Check your hurricane or named storm deductible to ensure it’s an amount you can afford. Buy the right wind and hail coverage through your insurer or your state’s insurance provider.

Code Upgrades

Building codes change over time. If something damages your home, insurance will generally not cover the cost of upgrading your property to meet new code standards.

Let’s say your state implemented new roof building codes. Your old roof gets destroyed. Your insurance compensates you for the value of that roof today (or its replacement cost, depending on your policy), but it doesn’t cover the added cost of meeting the new building code.

Some property owners buy building code insurance for extra protection. Building code insurance covers the cost of rebuilding or repairing property to meet local building code standards.

Mold

Ordinary homeowners insurance policies exclude mold damage caused by long-term leakage or moisture. That’s unfortunate, because mold can be a devastating and expensive problem.

If you have a leaking pipe between your walls, for example, then you might not notice the issue for years – until you spot the signs of mold damage.

Insurance may, however, cover mold damage caused by a sudden and unexpected source – like a burst pipe.

Solution? Check for signs of mold regularly. Order a professional mold inspection if you spot the signs. Look, listen, or smell for signs of water leaks. The sooner you notice the source of water intrusion, the more likely insurance will cover the cost of repairing it.

High-Value Items

Someone breaks into your home and steals your $5,000 engagement ring. Insurance covers it, right?

Unfortunately, every standard insurance policy has personal property limits. Insurance covers items up to a certain dollar amount – say, $1,500. Beyond that, you’ll cover the loss out of pocket.

Solution? Buy valuable personal property insurance through your insurer. Your insurer may request a few details of the item being covered – say, documents proving the value of an engagement ring. Typically, you pay a few extra dollars per month for extra coverage.

Earthquakes & Landslides

Earthquakes and landslides can cause catastrophic damage in certain states. Unfortunately, ordinary homeowners insurance policies don’t cover damage caused by earthquakes or landslides.

• Earthquakes and landslides are considered land movements, and ordinary homeowners insurance doesn’t cover land movements.
• Mudslides are also commonly excluded – but for a different reason. Mudslides are considered a type of flood damage. If you don’t have flood damage, you’re not covered.

Solution? Buy earthquake insurance through an organization like the California Earthquake Authority (CEA). Buy flood insurance through the NFIP. Work with a public adjuster to determine if the landslide or mudslide had a covered root cause (say, if a mudslide was caused by a previous forest fire in the region that would be covered by insurance).

Terrorist Attacks or Warfare

You may have scanned your insurance policy and seen exclusions for things like “terrorism” or “warfare.” You might think you don’t need to worry about those exclusions.

Prior to the September 11 attacks, most insurers covered terrorism and warfare-related damages without issue.

After September 11, however, terrorism and warfare exclusions have become more common – and they can and do affect property owners today.

One business owner in Palm Springs, for example, recently had his claim denied because of a terrorism exclusion. An attacker blew up his car in front of the hotel, causing severe damages. Insurers categorized the attack as terrorism and denied his claim.

Solution? If concerned about terrorism-related damages to your home or business, consider buying terrorism risk insurance. Per federal regulations and the Terrorism Risk Insurance Act (TRIA), certain insurers offer terrorism risk insurance through the Terrorism Risk Insurance Program (TRIP). TRIP was recently extended through December 31, 2027.

Why Reading the Fine Print Matters

Fine print isn’t just a buzzword. Fine print exclusions can be the difference between winning and losing a costly claim.

Public adjusters can identify gaps in coverage, then close them.

Even if an insurer has denied your claim because of an exclusion, it could be a negotiating tactic. In many cases, public adjusters can prove damage was not caused by an excluded event, potentially increasing payout significantly.

A good public adjuster scans your policy and analyzes your damages, then applies coverage fairly with your best interests in mind. That could mean higher payouts, faster settlements, and a less stressful insurance claim.

Contact Ironside Claims today to schedule a no-cost, no-obligation appointment with a public adjuster to understand your exclusions – and how to avoid them.