Cats, Rats, and Bats - What Homeowners Insurance Fails to Cover

Published: 14th March 2008
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According to surveys conducted by the National Association of Insurance Commissioners (NAIC), millions of homeowners assume that their standard homeowners insurance insures them against several kinds of losses typically excluded from coverage. These exclusions are sometimes referred to as "Cat, Rats, and Brats," reflecting three exceptions to standard coverage.

Cats. A 2007-2008 survey conducted by the American Pet Products Manufacturers Association reveals that 71.1 million of America's 113.7 million households (63 percent) own at least one pet. This represents an all-time high for pet ownership in the United States. Many people assume that their home owners insurance covers damage to windows, doors, furniture, and carpeting caused by pets. They are mistaken. A standard homeowners insurance policy excludes damage caused by cats, dogs, rabbits, and other pets. The NAIC reports that 22 percent of the people they surveyed thought that their insurance covered injuries to or theft of pets. This is not correct.

Rats. Damage by wild creatures is not covered by homeowners insurance, either. Nearly a third of the homeowners surveyed by the NAIC (31 percent) mistakenly believe that damage caused by infestations of rats, bats, mice, ants, termites, and other pests is covered by their homeowners insurance. It is not. Pests are so prevalent that insurance companies cannot afford to assume the risk of property losses they might cause.

Brats. Children and young adults lack the experience-and sometimes the respect for property-to be careful with personal possession or even the home. Whether the result of an innocent accident or malicious acting out, damage caused by children is not covered by home owner insurance.

Living on the flats. According to the U.S. government, virtually every part of the United States is subject to flooding. Some areas are more susceptible to flooding than other areas, of course. The areas most at risk are known as Special Flood Hazard Areas. Because floods cause widespread damage, private insurers cannot profitably insure against their risk. To prevent floods from wiping out the assets of the millions of Americans who live in flood zones, the U.S. Congress enacted the National Flood Insurance Act of 1968, establishing the National Flood Insurance Program (NFIP). Funded with premiums from homeowners and able to borrow against the national treasury, the NFIP offers the only kind of flood insurance available in the United States. Optional in some areas, flood insurance is mandatory for homeowners who live in Special Flood Hazard Areas. Despite the fact that flood insurance requirements are disclosed when a person purchases a home, the NAIC found that 33 percent of respondents wrongly assumed that their homeowners insurance covered flood damage.

War-like acts. The mainland of the United States has sustained damage from war-like acts only four times in its history. The first attacks came in the War of 1812 when British troops invaded points along the border with Canada and burned Washington D.C. The second incursion occurred when forces under the command of Mexican General Pancho Villa raided Columbus, New Mexico on March 9, 1916, and burned the town. The third attack occurred on February 23, 1942, when a Japanese submarine fired on an oil refinery in Santa Barbara, California. By far the worst attack occurred when terrorists from the al-Qaeda network flew airliners into the World Trade Center and The Pentagon on September 11, 2001, killing 2,998 and causing more than $30 billion in direct property damage. Damage caused by war and acts of terrorism are not covered by homeowners insurance.

Earthquake cracks. Earthquakes have struck 39 of the 50 states since 1900. According to the Federal Emergency Management Agency (FEMA), earthquakes cause more than $4 billion in property damage per year. Because earthquakes cause widespread damage in a matter of seconds, insurance companies cannot afford to cover earthquake damage with a general homeowners insurance policy. Nevertheless, the NAIC survey reveals that 35 percent of homeowners believe their homeowner's insurance covers earthquake damage. To insure their homes, homeowners need to purchase separate earthquake policies. After the Northridge earthquake of 1994 that caused $12.5 billion in losses, California insurers stopped offering earthquake insurance. To guarantee that homeowners at least could rebuild their homes after a severe earthquake, the California legislature passed a law requiring property insurers operating in the state to offer "mini-policies" to cover primary dwelling spaces, but not pools, patios, and other non-essential structures.

For most people, their home is their biggest expense and largest asset. While the majority of homeowners know that some things are excluded from their homeowners insurance coverage, a surprisingly large number of people-roughly a third of homeowners-do not realize that their coverage excludes some types of damage. Every homeowner should review their homeowner's insurance policy to verify their coverage then contact their insurance agent to discuss what types of additional coverage might be necessary to protect their home.

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