Is Foundation Insurance Covered by My Homeowners Policy?

When you own or are buying a house, homeowner's insurance is not optional. If you have a loan on your property, the lender will usually require you to have the policy to protect their investment. If you own your home outright, you will expose yourself to substantial financial loss if you skipped buying a policy. Too many things can go wrong, including natural disasters, fires, water damage, etc. But not all homeowner's policies are alike, and most don't cover every significant threat. For instance, if you want coverage for your home's foundation, you'll probably need to purchase additional policies. Even then, you won't have total protection.

You may be tempted to reduce your premiums by skipping this type of coverage, but the investment is well worth the extra dollars. Too many things can go wrong with your home's foundation after a storm or plumbing disaster. And when the foundation goes, your entire house can be damaged or even ruined. It may be a cliche, but it is true: You have to have a strong foundation if you want to avoid calamities.

General Homeowner Policies

At the minimum, you need to purchase a basic insurance policy. Most home repairs are expensive and often don't fit into a family's budget. A general homeowner's policy usually includes the following coverage: destruction and damage to your home's interior and exterior, theft or loss of your possessions such as furniture and appliances, and liability if someone is injured on your property. These things represent the minimum amount of coverage that you need.

Of course, you can purchase a variety of policies that offer different protections. Many homeowners choose from three standard coverage levels: cash value, replacement cost, and extended replacement cost. When choosing among these types, you have to consider how you would proceed if your home were a total loss. You would need a bigger payout if you wanted to replace your home at current market values.

The standard policies themselves are designated HO-1 to HO-8, so you have to consider the advantages of each form carefully. The significant characteristics of the most popular types are as follows:

• HO-1: 

  The most basic of policies, the HO-1, covers individual events, including fire, lightning, hail, windstorms, theft, aircraft damage, and explosions.

• HO-2: 

  (Broad form) This policy type offers more coverage than HO-1 and adds events such as damage from falling objects, ice or snow weight, pipes bursting, and water overflow. This type also covers loss or damage to personal belongings.

• HO-3: 

  (Special form) Currently, this policy type is the most common and expands coverage past specific events. Instead, damage to your home and belongings is generally covered unless it is specifically excluded.

• HO-5: 

  (Comprehensive form) This form is similar to HO-3 but contains fewer exceptions and offers flexibility with coverage limits.

The other HO policies cover different types of housing, including mobile homes, rentals, and condos, and are tailored for these particular abodes. Renters need to protect their possessions and not the building. Those in mobile homes may find their coverage limited because these structures are quite vulnerable to storms.

Exclusions

Insurance companies protect themselves by excluding coverage for specific events or circumstances. They are quite precise about what they will and will not cover. The standard policies often have a number of these exclusions for their payouts. They do not cover earthquakes and other ground movement damage, floods, mold caused by long-term leaks, wear, and tear, hurricanes, termites and mice, etc. In some instances, you'll be able to purchase separate policies that cover these threats. Many homeowners buy flood insurance or earthquake insurance when it's available and affordable. Buying earthquake insurance in California is an expensive but sensible investment, as is hurricane insurance in Florida. This coverage is not part of standard policies, however. You will have to ask for what you need.

Riders

If you own several expensive items, you can invest in a rider that specifies how much coverage you'll have if that item is damaged, destroyed, or stolen. For instance, your grandmother's antique diamond ring should probably be covered by a rider instead of being lumped in with your other possessions. You may own valuable coin collections or expensive artworks. A passenger can give you the special protection you need without forcing you to buy a separate policy.

Costs

The risk determines the cost of your policy your insurer is taking. After all, the companies are in the business to make money. They are betting that they will take in much more money from premiums than they will be paying out. If your home is considered more of a risk than your neighbor's, you'll pay more even if the houses are comparable in value. And if you want "extra" coverage such as flood insurance, you will pay more, especially if you live in an area prone to flooding.

If you've made a claim or two in recent years, you will also see an increase in your premiums. You may even lose your coverage if you make too many homeowners' claims. The insurance companies sometimes cut these high-risk homeowners loose to protect their bottom line.

Foundation Issues

Foundation problems are among the most severe issues a home can have. They are more common in older homes, but they do appear in newer homes that suffer severe weather events or in residences with construction issues. Homeowners are often unhappily surprised when they learn their foundation problems are only covered under standard policies if they were caused by specific events such as a covered windstorm or flood. That means that many foundation issues simply aren't covered unless you have acquired separate policies that include the foundation under certain circumstances.

Signs of Foundation Problems

Foundation problems can creep up on you because they are often subtle in the beginning. You can spot some of these problems if you regularly inspect your property. Your home will often show clear signs if your foundation is failing in some way. Some of the standard signals include:

• Cracks.

You may spot cracks in your floors, walls, or foundation. Tiny hairline cracks are standard in the first few years after construction is completed, but more substantial cracks, particularly horizontal cracks, can be signs of a severe issue. They indicate that your foundation is under too much pressure.

• Sinking Versus Settling.

A little settling of your home is normal, but noticeable sinking should alarm you. Even 1 1/2" inches of settling can indicate a huge issue. If you fail to address severe settling or sinking, the structural integrity of your home can be damaged beyond simple repair.

• Slab Foundations.

If your home is on a slab, you need to be particularly vigilant. Soil contraction, ground freezing, or water leaks can cause your home's slab to thrust upward, creating separation between the walls and the floor, cracks in the interior and exterior of your home, and uneven flooring.

• Door Sticking.

Something as simple as a sticking door can signal that your foundation is in trouble. This issue may appear and reappear depending on the time of year, indicating that your foundation is shifting noticeably when the ground temperature changes.

• Window and Door Gaps.

These unsightly gaps are another indicator of foundation issues. They often appear both inside and outside your home and can become quite large.

Foundation problems can also cause your kitchen cabinets to separate from the wall, create a sagging floor, or make your crawl space or basement damp. You cannot afford to ignore these signs since a foundation problem only worsens over time, leading to exorbitant repair costs and difficulty in selling your home.

The average cost of foundation repair is over $4,000 but can cost tens of thousands of dollars in some instances. Protecting your home from these problems is essential to your financial wellbeing. You need to routinely assess the health of your foundation and acquire necessary insurance protection whenever possible.

Foundation Coverage

The bad news is that your foundation is often not covered under your homeowner's policy, which can be a real blow to your finances and the value of your home. If your home's foundation begins to settle or show wide, vertical cracks significantly, you will need to take action, but often, you will be paying out of pocket for the entire repair cost.

Fortunately, there are a few exceptions. If your foundation problems are caused by a specific event that is covered under your homeowner's policy or supplemental policy, then the insurance company will pay for the damage. For instance, if your foundation problems are a result of burst pipes, then you can put in a successful claim.

If an earthquake damages your foundation, the damages will be covered only if you have an earthquake policy. The same goes for flooding. An individual flood protection policy will cover your foundation if a flood causes the problems. Of course, you won't receive a payout if your foundation needs work that was not explicitly created by the water damage.

The Right Policies

Since the issue of foundation coverage can be complicated, you need to research your options and get help from an agent when appropriate. If you already have a homeowner's policy, you need to check to see if any foundation work is covered. If not, consider adding the protection that is most likely to benefit you. This means you will be paying more in premiums, but that is the price you'll pay for a higher level of protection.

You will never be able to protect yourself from all foundation damage completely. If a specific event or result does not cause the issues from shoddy workmanship, your homeowner's policy or policies will not help. In the latter case, you can sometimes make a liability claim against your contractor's insurance.

Vigilance

Your best foundation protection is catching problems early when repairs will not be as costly. Experts recommend performing the following actions to assess and maintain your foundation's health:

• Adjust downspouts so that the water is directed between five and ten feet from your foundation. Too much water near the foundation causes it to settle and crack.

• Keep tree roots away from your foundation. Plant new trees well away from your home and consider installing a root guard for added protection from existing trees.

• During dry weather, pour water around your foundation to see if a gap develops. If one does, have your foundation looked at by a professional.

In too many cases, policyholders are not sure what is covered in their homeowner's insurance. You may have simply taken an agent's recommendation or signed up online without doing much research. This type of policy is certainly not one-size-fits-all. Your needs in this area are determined by several factors, including the value of your home, your geographical area, and the amount of insurance you can afford.

Payouts for foundation problems are rare with standard homeowners insurance, although the company will accept a claim in certain instances. These claims have to result from incidents that are covered by your general homeowner's policy or any supplemental coverage you may have purchased. You won't find a policy that protects you from all foundation problems, so you will have to accept some risk in this area.

Again, don't assume that you have all the coverage you need with an HO-1 or HO-2 policy. Depending on your unique situation, you may need a much higher level of protection.