El Niño Cometh: Understanding Your Homeowners Policy

“Nature cannot be ordered about, except by obeying her. ”

— Francis Bacon

I’m told that the storms of early January were but a foretaste of things to come. If that’s correct, I advise you to understand your homeowners policy. If you have renters or condo insurance, this post will also help you understand your policy. Renters, pay attention to Coverage C discussed below.

Parts of a Homeowners Policy

Generally there are 5 parts to the policy:

  1. Declarations: this is the most important page. Here you’ll find listed the covered property, the policy period, the policy limits, the premium amount, and the deductible amount.
  2. Definitions: you guessed it-here you’ll find definitions of terms used throughout the policy. Sometimes insurance coverage disputes turn on how a word is defined.
  3. Exclusions: here you’ll find what the insurance company has excluded from coverage.
  4. Conditions: this explains the steps a homeowner must do when there has been a loss.
  5. Insuring Agreement: this is the bulk of the policy. It’s the contractual agreement between you and the insurance company.

Types of Coverage

Generally there are 3 types of coverage:

  1. Coverage A-Dwellings: this is your house and any structures connected to it, like a garage.
  2. Coverage B-Other Structures: these are structures not attached to your house. Fences, gazebos, in-ground swimming pools, and spas are examples.
  3. Coverage C-Personal Property: this is your personal property, in other words, all your stuff.


Two things must occur before the insurance company will cover any damage: 1) the damaged property must be ‘covered property’ (which is listed on the Declarations Page); and 2) the damage must have been caused by a ‘covered cause of loss’ (which are defined differently depending on whether your policy is a named peril or an all peril). Common covered causes of losses are fire, lighting, and wind.

General Points

  • Water damage may be covered but flood damage is not
  • Wind damage to trees and plants is usually not covered
  • Cars and other motorized vehicles are not covered
  • Coverages A, B, and C are subject to insurance limits. Even if your entire home or personal property is damaged by a covered cause of loss, you can only recover the policy limit amount
  • Coverage C Personal Property is measured by Actual Cash Value. That means the insurance company can deduct for depreciation. You can, however, change that to Replacement Cost Value by an insurance rider. That prevents the insurance company from deducting for depreciation
  • Homeowners policies do not cover damage to land
  • Homeowners policies do not cover earth movement. But if the earth movement causes a ‘covered cause of loss’ (e.g. fire) to occur, then there may be coverage.

I admit this is dry and boring. But it’s important because you’re dealing with significant assets and sometimes catastrophic losses. You should make an attempt to understand your homeowners policy. And don’t trust the insurance company.

Questions? Contact Me for a free consultation.






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