What Are General Exclusions in Homeowners Insurance?
They're damage causes your policy won't pay for at all, like flood, earthquake, or neglect. Your policy lists them under exclusions.
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Flood and earthquake
Your new policy won't pay for either one. If the house sits near water or on ground that shifts, ask about a separate flood policy or earthquake policy now, before closing, since both can take time to start.
Neglect and upkeep
Damage from not maintaining the house, like a slow roof leak left alone or pipes that froze because the heat was off, isn't covered. Once you own the house, keeping it maintained is what keeps this exclusion from ever applying to you.
Pest and vermin damage
Termites, rodents, and insects causing damage to the house are excluded on nearly every policy. A pre-purchase inspection is the way to catch this before closing, since the policy won't pay to fix it afterward.
Reading your own policy
Exclusions vary by insurer and by state, so the binder your lender gets will list what applies to this specific policy. Read that list once before closing, so nothing about what it won't pay for surprises you later.
Policies covering the same house can draw these lines differently, and the price between them can vary even more. Before closing, it's worth getting quotes from more than one insurer and checking what each one excludes alongside what it charges. The binder your lender accepts has to meet their minimum, but it doesn't have to be the first one offered to you.
What else won't the policy pay for
Beyond flood, earthquake, neglect, and pests, a few other exclusions show up on nearly every homeowners policy. Damage from a sewer backup or sump pump failure is usually excluded unless added back as an endorsement. That's worth asking about if the house has an older sewer line or sits low on the lot. Mold is often excluded too, except when it results from a covered loss, like a burst pipe that wasn't caught in time. Earth movement beyond earthquake, such as a sinkhole or settling ground, typically falls outside the policy as well. Some of these can be added back for an extra cost if the insurer offers it.
War and nuclear hazard exclusions appear on every policy. This is standard language with no bearing on a home purchase. More relevant is the business exclusion. If part of the house is used to run a business, inventory and equipment tied to that business usually aren't covered under a standard homeowners policy. A landlord renting out a room or unit needs to say so when applying, since rental use can affect what's covered. None of these are unusual. They're boilerplate across insurers, but the binder should still be checked to see which ones apply and whether any have been modified for this policy.
Ordinance or law is another one worth knowing before closing, especially on an older house. If the home is damaged badly enough that it has to be rebuilt to current building code, a standard policy often won't cover the extra cost of meeting that code, things like updated wiring or a different foundation height. Older homes are more likely to trigger this gap, since codes have usually changed since they were built. Some insurers sell this coverage as an add-on, and it's a reasonable thing to ask about if the house is more than a few decades old.
Every exclusion listed in the binder can usually be read next to a note about whether it can be added back as an endorsement, for an added cost, or whether it has to be handled with a separate policy entirely. Flood and earthquake fall into the second group. Sewer backup, ordinance or law, and a few others often fall into the first. Knowing which is which before closing means fewer surprises after the house is owned, and it's a short conversation to have with whoever is issuing the binder.
How much does the policy actually pay out
Exclusions tell you what's not covered, but even covered losses don't pay out dollar for dollar. Two settings on a policy decide how much is handed back after a claim, and both are worth checking before closing. One is the deductible, the amount subtracted from every claim before payment. The other is how the dwelling itself gets valued when it's damaged.
Replacement cost and actual cash value are the two ways a policy can settle a claim on the house. Replacement cost pays what it takes to rebuild with similar materials, no deduction for age. Actual cash value pays that same rebuilding cost minus depreciation, so an older roof is worth less at claim time than a new one would be. Most lenders expect replacement cost coverage, and it tends to cost more upfront, but it closes a gap that actual cash value leaves open. The binder states which one applies, and it's worth reading that line rather than assuming.
Personal belongings inside the house are often covered on the actual cash value basis even when the dwelling itself is on replacement cost. That means a ten year old couch or television gets paid out at its depreciated worth, not what a new one costs. Some insurers sell replacement cost coverage for belongings too, as an upgrade to the base policy. Anyone with newer furniture, electronics, or appliances might find that upgrade worth asking about.
The deductible works the other direction, reducing every payout by a set amount the homeowner agrees to absorb first. A higher deductible usually lowers what the policy costs each year, and a lower one raises it. Some policies set a flat dollar deductible, others set a percentage of the dwelling coverage, and a percentage deductible on a higher value home can run into the thousands. The binder lists the deductible in plain terms, and it's worth comparing against the home's value rather than just the monthly cost of the policy.
Before you sign
Open the binder and find the exclusions list, the deductible, and whether the dwelling is covered at replacement cost. Compare those three lines against another insurer's quote before the number alone decides it.
