What Is Not Covered Under a Dwelling Policy?

A dwelling policy is property insurance for structures not occupied by the owner, such as rental properties or vacant homes. It protects the physical structure and sometimes limited personal property against specified risks, known as perils. While these policies offer financial safeguards, they do not provide limitless coverage. Understanding their limitations and exclusions is crucial.

Perils Generally Excluded

Standard dwelling policies typically exclude a range of perils, meaning certain causes of damage are not covered. For instance, damage from flooding is almost universally excluded. This includes rising water, overflow from natural bodies of water, or surface water entering the property, and separate flood insurance is usually required.

Earth movement is another common exclusion, encompassing damage from earthquakes, landslides, mudflows, or sinkholes. To protect against these events, property owners generally need to purchase separate policies or add specific endorsements. Acts of war, including insurrection or rebellion, and nuclear hazards are also broadly excluded from coverage.

Governmental action, such as the seizure, destruction, or confiscation of property by authorities, is typically not covered. Costs associated with complying with updated building codes or ordinances after a loss are generally excluded unless an “ordinance or law” endorsement is added.

Losses resulting from neglect, defined as the insured’s failure to take reasonable steps to protect or preserve property at or after a loss, are not covered. Intentional acts by the insured that cause a loss are also excluded from coverage.

Water damage from sewer backup, sump pump overflow, or water seeping up from the ground is frequently excluded or has very limited coverage. Specific endorsements are often available to cover these types of water damage. Damage due to mold, fungi, or wet rot is another common exclusion or is severely limited, often requiring special endorsements.

Dwelling policies do not cover damage resulting from the natural aging process, lack of maintenance, or mechanical failures. This includes wear and tear, deterioration, and mechanical breakdown. Environmental or chemical processes like smog, rust, or corrosion are typically not covered.

Damage from the natural movement of foundations, walls, or roofs, such as settling, shrinking, bulging, or expansion, is generally excluded unless it results from a covered peril. Lastly, damage caused by animals, birds, rodents, or insects is typically not covered, as these are often viewed as maintenance issues.

Property Types Excluded from Coverage

Beyond the perils, dwelling policies also specify certain types of property that are generally not covered, even if they are on the insured premises. The land itself, including the cost of the land or the land on which the dwelling is located, is never covered by these policies.

Animals, including pets, birds, or fish, are not considered covered property under a dwelling policy. Their protection falls outside the scope of property insurance for the structure.

Motor vehicles, aircraft, or hovercraft are typically excluded from dwelling policy coverage. These items are generally covered by specialized automotive or aviation insurance policies, unless they are specifically used for servicing the insured premises or designed for handicapped use.

The personal property of boarders or tenants residing in the dwelling is not covered by the owner’s dwelling policy. Tenants need to obtain their own renter’s insurance to protect their personal belongings.

Property primarily used for business purposes or inventory, especially if the dwelling is also used for a business, may be excluded or have very limited coverage. This often necessitates a separate business insurance policy.

Dwelling policies provide coverage only for property located at the insured dwelling address. Personal property moved off-site or to other residences is not covered under the dwelling policy.

Some policies may also exclude or limit coverage for underground structures or pipes not directly part of the dwelling’s foundation. This often includes water lines or drains that extend beyond the immediate footprint of the home.

Circumstances Leading to Coverage Limitations

Certain situations or actions by the insured can lead to significant limitations or even denial of coverage, even if a peril would otherwise be covered. One such circumstance involves vacancy or unoccupancy of the property. A dwelling is considered “vacant” if it is completely empty of both occupants and personal property, while “unoccupied” means no occupants are present, but furnishings remain.

Policies typically have clauses that limit or exclude coverage for certain perils, such as vandalism or frozen pipes, after a dwelling has been vacant or unoccupied for a specified period, often 30 to 60 days. It is important for property owners to notify their insurer if a property will be vacant for an extended duration.

Losses occurring during the commission of illegal activities by the insured or with their knowledge are not covered.

Providing false information on the insurance application or during the claims process, known as misrepresentation or fraud, can void the policy entirely or lead to a denial of a claim.

The insured has a responsibility to take reasonable steps to prevent further damage after a loss occurs. Failure to protect property after a loss can result in the denial of coverage for any subsequent damage that could have been prevented.

Significant structural changes or major renovation projects might require specific endorsements or a builder’s risk policy. A standard dwelling policy may not cover losses that occur during such construction periods.

If the dwelling is used for short-term rentals, such as through home-sharing platforms, the standard dwelling policy may not provide adequate coverage. Many standard policies consider such activity a business, which introduces commercial risks typically excluded from personal dwelling policies. A specific endorsement or a different type of policy, like a landlord policy, might be necessary to cover these activities.

Deliberately hiding or misrepresenting important facts, such as prior losses or the actual use of the property, can invalidate the policy.