7 Surprising Facts About Homeowners Insurance

Homeowners insurance can help you recover financially after a natural disaster or other loss on your property. It protects you against losses to your own home as well as your liability for injuries or property damage you cause to others.

However, there are a few aspects of this coverage that may surprise you — and knowing this information can help you in a variety of ways.

The following are seven frequently overlooked facts about homeowners insurance that you should be aware of:

1. You can reopen a claim after you receive a check from an insurance company 

If your home is damaged by a fire or natural disaster, your homeowners insurance company will dispatch an adjuster to assess the loss.

You will eventually receive a check to cover the cost of your claim. But what if you later discover damage that you missed the first time?

"You may be able to reopen the claim and file for an additional amount," says Loretta Worters, vice president of the Insurance Information Institute, a nonprofit.

Damage claims must typically be filed within one year of the date of the loss. However, the rules vary by state. For more information, Worters suggests contacting your state's insurance department.

2. Homes near fire departments and fire hydrants cost less to insure 

To save money, look for a home in a community with a "highly rated" fire department. If you live in such a community, your insurance premiums may be lower.

ISO rates fire departments on a scale of 1 to 10, with 1 being the best. These rankings are used by some insurance companies when determining insurance rates.

According to Worters, a fire department's rating is determined by a variety of factors. "(The rating is) determined by factors such as whether the fire department is volunteer or professional, as well as the type and extent of training provided to fire company personnel," she explains.

Other considerations include:

  • How effectively the department receives and dispatches fire
  • alarms.
  • The community's water supply is adequate.

You may also pay less if there is a fire hydrant nearby — typically within 1,000 feet, according to Worters.

3. An insurer cannot cancel your homeowners policy without good reason 

Homeowners insurance companies cannot cancel a policy that has been in effect for more than 60 days unless there are very specific circumstances, such as when the insured party:

  • Does not pay the premium.
  • Fraud is committed.
  • On the original insurance application, the applicant lies or makes other false statements.
  • Abandons the property or allows it to deteriorate.

However, once the policy term expires — typically on the one-year anniversary — the insurance company has the option to refuse to renew the policy.

According to Carole Walker, executive director of the Rocky Mountain Insurance Information Association, rules vary by state, but the insurer is required to give you advance notice of a pending nonrenewal. "The majority of states require at least 30 days' written notice," she explains.

Walker adds that many states also require insurance companies to explain why they are not renewing your policy.

4. Your dog may make it harder to buy comprehensive homeowners insurance 

Most homeowner's insurance policies cover you if your dog bites someone. The liability portion of your policy will typically cover up to $300,000 in damages.

Some insurers, however, will not sell to dog owners or owners of specific breeds, such as pit bulls and Rottweilers. Others may restrict the type of coverage you can obtain.

Dog owners with a history of biting are more likely to face these restrictions. In these cases, your insurer may:

  • Decide not to renew your insurance policy.
  • You will be charged a higher premium.
  • Exclude any dog-related damages from coverage.

State laws govern how insurers may treat dogs. In Michigan, for example, insurers cannot deny coverage based on the breed, according to Lori Conarton, a spokeswoman for the Insurance Institute of Michigan.

"However, pet owners' insurance may be canceled or non-renewed if the animal bites a person or attacks another animal, resulting in a liability claim being paid under the homeowner's insurance policy," she says.

5. Your home remodeling project may not be covered 

Are you thinking about adding a new room or other structure to your home? Before you begin a renovation or addition, it is best to contact your agent.

"Ask if you'll need to update your homeowners insurance and if you'll need other types of insurance to protect yourself financially during the project," Worters advises.

If you do not do so and the project is damaged, whether before or after completion, you may not be covered.

In addition, request a copy of all contractors' and subcontractors' insurance policies, including the commercial business/general liability policy and the workers' compensation policy.

If a worker is injured on your property and the contractor does not have adequate insurance, you could be sued. In that case, Worters recommends hiring a different contractor.

6. You can buy valuable water-damage coverage for $50 

According to the III, water damage — including damage caused by frozen water, such as burst pipes — was the second most commonly filed homeowners insurance claim between 2008 and 2012.

Most people are aware that flooding is not covered unless a separate policy is purchased.

However, many homeowners may be unaware that many policies do not cover sewer and drain backups.

"Imagine the mess and expense of a sewer backup, and having to pay for it out of pocket," Walker says.

According to the III, you can often purchase a separate rider that will provide you with this coverage for as little as $50 per year. To learn more, contact your agent. We can assist you in finding a new insurance policy that covers more.

7. Your lender may limit the size of your insurance deductible

Many homeowners try to reduce their premiums by raising their deductible. According to III, increasing your deductible from $500 to $1,000 can result in savings of up to 25%. You can save even more money if you choose a higher deductible - some insurers, such as MetLife, offer flat dollar deductibles of up to $10,000.

However, your lender may limit the amount of your deductible, which is usually $1,200 or less.

"They may limit the size of your deductible because they want to ensure you can pay the deductible in order to have repairs done on the property," Worters explains.