Common Exclusions in the Property Insurance Industry

Common Exclusions in the Property Insurance Industry

Property insurance provides financial protection against various risks, but not all types of damage or losses are covered. Policyholders often assume they are fully protected, only to find out that certain events or conditions fall under policy exclusions. Understanding these common exclusions can help property owners avoid unpleasant surprises and make informed decisions about supplemental coverage options.

1. Wear and Tear / Maintenance-Related Damage

Insurance is designed to cover sudden and accidental losses, not gradual deterioration. Damage resulting from poor maintenance, neglect, or normal wear and tear is typically excluded. Examples include:

• Roof deterioration due to aging

• Plumbing leaks from corroded pipes

• Mold or mildew from poor ventilation

2. Flood Damage

Most standard property insurance policies do not cover flood damage. Flooding caused by hurricanes, heavy rains, or overflowing rivers requires a separate flood insurance policy, usually through the National Flood Insurance Program (NFIP) or a private insurer.

3. Earthquakes and Ground Movement

Earthquakes, landslides, and sinkholes are often excluded from standard property insurance. Homeowners in high-risk areas should consider purchasing separate earthquake insurance or ground movement coverage.

4. Sewer Backup and Drainage Issues

Water damage from backed-up sewers, sump pump failures, or clogged drains might not be covered unless specific endorsements (additional coverage options) are added to the policy. Also, even where there is coverage, these coverage are sometimes limited by the maximum amount the insurance company can be required to pay.

5. Acts of War and Terrorism

Damage caused by war, military actions, or terrorist attacks is usually excluded. Some insurers offer terrorism coverage as an add-on for expansive commercial policies, but war-related losses remain uninsurable in most cases.

6. Nuclear Hazard

Losses resulting from nuclear accidents, radiation exposure, or contamination are usually not covered under standard property insurance policies.

7. Intentional Acts and Fraud

Insurance does not cover damage caused intentionally by the policyholder. Fraudulent claims, arson-for-profit schemes, and intentional property destruction are not only excluded but may also result in legal consequences.

8. Government Actions and Seizures

If a property is seized, condemned, or damaged due to government actions (e.g., eminent domain or demolition orders), insurance typically does not provide compensation.

9. Power Failure

Damage caused by off-site power failures (such as widespread blackouts) is typically excluded unless the outage leads to a covered peril, like a fire. Special endorsements are sometimes offered for this coverage, but even those are often subject to a limited amount of coverage.

10. Certain Types of Personal Property

While property insurance covers personal belongings, there are sometimes limits on certain high-value items, such as:

• Jewelry

• Fine art

• Collectibles

• Firearms

• Cash or securities Owners of valuable possessions should consider adding scheduled personal property endorsements to ensure full protection.

How to Protect Against Exclusions

Since exclusions vary by policy and provider, homeowners should:

• Review their policy carefully to understand what is and isn’t covered.

• Consider supplemental insurance (such as flood, earthquake, or sewer backup coverage) for risks relevant to their location.

• Perform regular maintenance to prevent issues like plumbing leaks or roof deterioration that insurers may classify as neglect.

• Work with an insurance agent to customize coverage based on individual needs and risk factors.

Final Thoughts

Understanding common property insurance exclusions helps policyholders avoid unexpected coverage gaps. By knowing what risks are not covered and taking proactive steps to secure additional coverage where necessary, property owners can ensure they have comprehensive protection for their assets. If in doubt, give Averill & Reaney a call and we can help clarify exclusions and recommend solutions tailored to your specific needs.

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