More Fine Print Creeps Into Homeowner Policies

NEW YORK —  A guest slips on your wet patio. Outdoor critters damage a backyard shed. A tree crushes your garage while water floods the basement during a storm.

Are all these covered by your homeowner’s or renter’s policy?

Yes, no, yes . . . and maybe.

Figuring out what’s protected by insurance can sometimes turn into a guessing game for those unfamiliar with the workings of their policies. In other words, many of today’s busy homeowners.

Few bother to regularly review the fine-print exclusions set by insurers--and more of them have been creeping in, especially after Hurricane Andrew in 1992, industry experts say.

“Who reads all that stuff? It’s so long and complicated,” said Robert Hunter, director of insurance for the Consumer Federation of America in Washington.

Financial advisors and consumer groups, however, recommend that homeowners conduct regular insurance checkups, reviewing their policies for any holes in coverage.

A home and its contents often represent a major component of net worth, and any losses due to inadequate coverage could derail years of sound financial planning.

Now may be a good time for an insurance inspection, since most people tend to entertain more during the summer months, thereby increasing potential liabilities, and the peak season for wildfires in California is around the corner.

Standard homeowner policies, required by mortgage lenders, cover loss of home and personal possessions due to a number of perils, such as fires, vandalism, theft and most natural disasters. They also provide limited liability protection.

If a tree falls on your garage, you’d be covered for damage to the structure, along with the cost of removing the tree.

If someone slips on your wet patio, you’d be covered for medical expenses arising from any injury, a limited amount of damages, and legal costs to defend yourself against claims.

But if a court award exceeds the limits of your liability coverage, your assets could be at risk. An “umbrella” policy may be necessary. It typically provides additional liability coverage of $1 million or more.

Jeanne M. Salvatore, a spokeswoman for the Insurance Information Institute Inc. in New York, notes that there are many other limits and exclusions homeowners must be aware of.

It may be necessary for some households, for example, to purchase special property endorsements, or “floaters,” to insure certain valuables, such as jewelry, silverware, furs or electronic equipment at higher amounts than allowed under a standard policy.

Flooding is another big issue. Those who live in a flood-prone area should consider buying separate flood insurance provided through the Federal Insurance Administration, Salvatore said.

“Water seepage is not covered. It’s considered a maintenance issue,” said Salvatore. “[But] if your house is damaged by an insurable peril [such as a hurricane] and water gets in because of that, you’re covered” under the standard policy.

Flooding caused by burst pipes or any other accidental discharge of water from your plumbing system also is covered under standard policies.

Losses caused by earth movements aren’t. This covers earthquakes, landslides, sinkholes, mudslides or tremors related to a volcanic eruption. If you live in a high-risk area, separate earthquake insurance may be necessary.

Other common exclusions:

* Neglect or wear and tear. It’s up to individuals to use all reasonable means to preserve their property, and if they don’t, coverage may be forfeited. That includes damage caused by smog, rust, mold, wet or dry rot, birds, vermin, rodents, insects, even pets.

* Ordinance or law. This means enforcement of any ordinance regulating construction, repair or demolition of a structure. If your house burns down and a city ordinance requires it be replaced with a stronger structure, your policy might not cover this.

* Business losses. This includes parts of your house used for business, data or papers taken from work and computers, software or other property belonging to your company. Liability falls into this area too. There’s no coverage if someone injures himself while delivering a package to your home office.

Hunter of the Consumer Federation also points out that many companies have done away with guaranteed-replacement policies, which used to pay whatever it cost to replace or rebuild a home hit by fire or some other disaster, even if it exceeded the policy limit.