3 Things Home Insurance Doesn't Cover That Could Come as a Surprise

When buying homeowners insurance, most people expect that they will be protected against losses that they face with their property. After all, the point of buying insurance is so a disaster does not empty a property owner's bank account and destroy their financial security.

Unfortunately, while home insurance policies cover lots of possible sources of loss -- including things like fires and theft -- there are some hazards that are not typically covered by a standard policy. And many of these exclusions could come as a big surprise.

In particular, homeowners may be shocked to discover their insurance will not protect them from the following disasters.

1. Floods

Water can do a tremendous amount of damage to a home in a short period of time. And, some water damage is covered. If a fridge or tub leaks, for example, your homeowners insurance will likely pay for the resulting consequences.

Unfortunately, insurance won't cover the water issue most likely to cause you problems. That's because rain and storm flood damage are typically excluded from a standard homeowners insurance policy. This means if a hurricane brings torrential rains or a major rainstorm causes a creek beyond a home to flood, insurance won't be there to help you.

Homeowners who are located in a designated flood zone will typically be required by their mortgage lenders to purchase add-on flood coverage (which is available through FEMA's National Flood Insurance Program). Even those not in a designated flood zone may wish to look into a policy, though, if they have water near their home and they are concerned about a bad rainstorm leading to uncovered losses.

2. Earthquakes

Most natural disasters are not covered by a standard homeowners insurance policy either. This includes earthquakes.

There are standalone earthquake policies that can be purchased, though. This includes traditional earthquake insurance that would provide reimbursement for the value of lost items if a covered event happens, as well as parametric insurance that covers only specific events such as when an earthquake meets a certain intensity level.

3. Sinkholes

Sinkholes can be a frightening experience, sometimes opening up to swallow whole buildings. Unfortunately, homeowners insurance is not going to provide coverage for them if homeowners have only a standard policy.

Sinkholes are more common in certain states than others, with an elevated risk existing in Alabama, Florida, Kentucky, Missouri, Pennsylvania, Texas, and Tennessee. Those who face a risk of losses caused by a sinkhole may be able to get add-on coverage for their existing insurance policy. Many insurers offer sinkhole riders that will pay for both repair or replacement of the building as well as repair or replacement of any property damaged by a sinkhole.

It is important to understand the different options that exist to provide coverage for hazards excluded from a standard insurance policy. But, it's only possible to find and buy the right protection if homeowners know what isn't covered.

Homeowners can't afford to wait until a disaster happens to understand the limitations of a standard homeowners insurance policy. Anyone who owns a property should review their insurance contract carefully, and consider talking with their home insurer if they aren't sure if something is covered. It's better to find out before the flood, earthquake, or sinkhole that the disaster won't be covered than to learn this after the fact and be left with devastating financial loss.