Why Doesn't Homeowners Insurance Cover Every Repair?

It's important to understand how these policies work.

When friends of mine bought a house a few years back after having rented all their lives, they knew to put some cash aside in a savings account for home repairs. But when their water heater stopped working just over a year after they'd moved in, they were shocked to learn that their homeowners insurance policy would not pick up the tab.

I wasn't surprised to hear that at all, though. In fact, a lot of people I know have some big misconceptions about homeowners insurance. And one is that it will cover every single expense related to a home. But that couldn't be more wrong.

It's not coverage for every little thing

You probably pay a fair amount of money for homeowners insurance, no matter where you live. In fact, Progressive's prices range from $999 to $1,655 for a 12-month policy effective on or after April 1, 2020. But even if your costs veer toward the higher end of that range, it doesn't mean your policy will pay for everything you expect it to.

Your homeowners insurance policy will generally offer a few types of protection. You'll usually be covered in the event of property damage, such as from a weather event (though you won't always be covered in the event of a flood unless you have a separate flood insurance policy). 

You'll also generally have liability coverage that protects you in the event that someone gets injured on your property. And you'll often have protection against theft, at least to some degree.

But homeowners insurance isn't like health insurance. With health insurance, you're expected to show your insurance card whether you're being rushed to the hospital for emergency surgery or you're going to the doctor to follow up on a condition you've had for years. Your health insurance company even picks up the tab for preventive care, like annual physicals.

Homeowners insurance doesn't get utilized every single time there's something to be fixed or addressed within your home. So if your home is broken into, your insurance coverage will generally kick in. The same holds true if a tree falls onto your roof and causes damage. 

But one thing your homeowners insurance policy won't cover is wear and tear. It's simply not designed to do that. And many of the home-related expenses property owners face have to do with wear and tear. 

So, getting back to my friends' water heater issue. Had someone broken in and stolen their water heater, their insurance company probably would've paid for another one. But because their water heater stopped working over time due to age, they can't file a claim against their homeowners insurance. 

You should also know that in some cases, it may not pay to file a claim against your homeowners insurance policy, even if the issue in question is covered. That's because you have to meet a deductible with every claim. And if your deductible is the rough equivalent of the total bill, then you're generally better off paying for repairs yourself. File too many claims, and your homeowners premiums could start to soar.

Know the rules of your policy

Not only will your homeowners insurance policy not cover wear and tear, but it may not cover things like earthquake damage and sewer line backups. It's important to familiarize yourself with the terms of your specific policy so you know what to expect out of it.