One of the reasons we encourage buyers to ask a few direct insurance questions up front is simple: insurance policies have exceptions, and it’s easy to assume something is covered when it isn’t.
A story
A good friend bought his first home a while back. He and his wife went on their honeymoon and came home to find their basement flooded. The water came in from the outside. The problem was that a downspout extension was missing, and there was a heavy rainstorm while they were gone. Without the downspout extension, water collected in a window well and eventually flooded the basement.
It was no fun coming home from their honeymoon to this, but they had insurance, so at least they wouldn’t have to deal with it themselves. At least that’s what they thought. It turned out that because the water came in from the outside, their policy did not cover the damage. They were told they would have needed a separate flood policy for that situation. They discovered that, if the water had originated from inside the home (a water heater failure, for example), the damage would have been covered.
The point isn’t to be paranoid, but to have a basic understanding of what your policy covers and what it excludes.
A few questions worth asking your insurance agent:
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- In your experience, where are people most surprised? What kinds of claims do homeowners most often assume are covered, but aren’t?
- If we’re away and something happens—especially water—what does the policy require us to do?
- What are the most common ways people inadvertently create coverage problems?
HOA / attached-home-related questions:
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- Can you review the HOA master policy and tell me what it covers vs what my personal policy needs to cover?
- Do I need ‘walls-in’ coverage (studs-in), and what exactly does that include for this unit?
- Do I have loss assessment coverage? What’s the limit, and do you think that’s sufficient?
The bottom line? Don’t assume. Before closing, ask your agent a few direct questions, and if you’re buying a townhome or condo in an HOA, make sure your personal policy is coordinated with the HOA master policy. We’re not insurance agents and can’t tell you what your policy does or doesn’t cover—but we can tell you people are often surprised by exclusions, and it’s worth getting clarity now.