Perils, exclusions and add-ons

Every insurance policy is unique. However, when looking across HO types, you’ll find some similarities. There are about ten named perils that frequently appear in the most basic plans, and about 16 named perils that you might see in mid-level plans. The same is true for the exclusions listed in the comprehensive policies.

Named perils: when you are reimbursed

A named perils policy means your insurance company will only reimburse you for damage that occurs as a result of one their listed situations. Named perils vary for each insurance policy, but the following are some of the more common perils named in basic insurance policies:

• Fire and lightning damage
• Storm, wind, or hail damage
• Smoke damage
• Vandalism
• Theft
• Damage caused by a vehicle
• Damage caused by an aircraft
• Explosions
• Riots and civil unrest
• Falling objects

Mid-level and standard policies typically include more named perils than the basic plans. These are some of the additions you may find if you step up to a standard plan:

• Damage due to weight of snow or ice
• Sudden and accidental discharge of water
• Appliance problems
• Power surges
• Freezing
• Volcanic eruption

Exclusions: when you are not reimbursed

Exclusions are the situations in which loss or damage is not covered by the insurance base plan. You’ll find these in comprehensive “open perils” or “all risks” plans, which means the insurance company covers the costs of damage and loss unless the cause is listed in the exclusions.

Like named perils, exclusions can vary across policies. The following list is a sample of some of the more common exclusions:

• Ordinance or law change
• Earthquake
• Flood
• Power failure
• Theft while under construction
• Mold, fungus, wet rot
• Smog
• Foundation settling
• Birds, pests, and rodents
• Neglect
• War
• Nuclear hazard

To be eligible to receive compensation for damages that result from one of the listed exclusions, additional add-on insurance must be purchased before the damage occurs.

Add-ons, endorsements and insurance riders

For insurance needs beyond your regular coverage, you may wish to purchase additional add-ons or endorsements, also called insurance riders or floaters, or you may choose to purchase an umbrella policy. These additions are meant to give you extra coverage or insure for a particular exclusion, item, or liability. If you live along a fault line or on a flood plain, you may choose to add earthquake or flood insurance. If you own collectibles, fine art, or fine jewelry that is appraised at a value higher than your coverage allows, you may wish to insure those particular items through specific additions to your policy. If you have a particular liability, such as owning a dog while renting, you may be able to purchase a liability rider to decrease the homeowner’s and your own financial risks.

Liabilities and other factors that affect costs

Your HO type is only part of the equation that determines the actual cost of your plan. There are several other factors that go into determining what your plan will cost:

• Coverage limits. The more money your insurance company might have to pay, the higher your monthly premium will be.
• Deductibles. Higher deductibles that make you responsible for more of the initial expenses will lower your monthly insurance rate. Lower deductibles will raise it.
• Construction materials. Concrete and brick houses are less flammable than wood houses. The more flammable your home, the more your insurance is likely to cost.
• Age of home. Older homes made of older materials may cost more.
• Renovations. Keeping your home up-to-date so it is safer and more energy efficient could lower your rates.
• Claims history. Homeowners and renters who have filed insurance claims in the past three to five years are likely pay more for their insurance than policy holders who haven’t.
• Credit history. Historically, good credit has lowered rates. However, due to the pandemic, Washington state law now prohibits insurance companies from using credit scores to determine rates. This law is subject to change, and other states may have different laws.
• Liabilities. Homes that impose higher risks for injury lead to higher insurance premiums. Swimming pools, trampolines and dogs are among the main culprits for increased insurance costs.

A note about dogs

With the rising costs of medical treatment and litigation, the 2021 average dog bite claim was $49,025 according to Insurance Information Institute. Because dog bite claims are expensive, dogs can be a big factor in your insurance costs. One way you might choose to mitigate costs is through the Canine Good Citizenship Test. To be eligible for the test, you and your dog must go through the American Kennel Club’s certification program. Passing the test is testament to your dog’s general good manners and non-aggressive attitude.

However, the test alone may not be enough for some insurance companies. Some companies simply limit liability or deny coverage for certain types of dogs, such as Dobermans, Rottweilers, chow chows, pit bulls and more.

In short, if you have a dog or are planning to get a dog, research your insurance company’s policy on dogs as well as your lease and landlord’s policy to ensure you have a good fit.