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3 Home Insurance Horror Stories

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No one wants to file a homeowner’s insurance claim. The process can take some time and usually follows damage to your home. When homeowners are at their most vulnerable, you’d think that insurance companies would show a bit of compassion. Unfortunately, this is rarely the case. It’s been said there’s no better teacher than experience. So there might be a few things we can learn from homeowner’s insurance horror stories. Like what not to do…

Sneaky Language Leaves Homeowners in a Box

Forums and social media are full of homeowner’s complaining about the claims process. Most of the time, homeowner’s have simple, but frustrating, complaints that will eventually be resolved. However, a few find themselves in situations where coverage doesn’t meet expected replacement costs.

This happens for a variety of reasons but the most common is an uneducated homeowner and a pushy salesman. One poster on a Google groups forum experienced such a situation after her home caught fire in February 2013. While the homeowner received a replacement cost for much of the interior property, it turns out the building itself didn’t have the same protection. The house, built in the 1960s, wasn’t up to modern construction code. The insurance company was willing to offer replacement on the house itself, in the condition it was built in the 1960s. The cost of code improvements (which are required for construction in many states) were left to the homeowner.

Little mistakes like this are pretty common with homeowner’s insurance policies. In this instance, it was (most likely) a mistake made by the underwriter while creating the policy. However, some insurance companies have been known to be pretty shady when dealing with customers.

Uncovered Damage Leaves Homeowners Uncovered

Hurricane Sandy ravaged New York and New Jersey in October 2012. In total, damages cost roughly $68 billion with much of that burden falling on private businesses and homeowners. Though insurance covered a substantial portion of the costs, some homeowners were left holding the substantial bill for repairs.

Like the example above, this typically happened with people that had gaps in their homeowner’s insurance coverage, such as people assuming their policy covered flooding. However, homeowner’s in places like New York often upgrade their basements and other sub-surface areas. Surprisingly, flood insurance does NOT cover upgrades made to basements. In one instance covered by CNN, a homeowner discovered the ground floor to his New York townhome was, in fact, the basement. As a result, flood insurance refused to pay out for much of the damage caused on the ground floor of his home.

Internet Guests Turn Quick Cash into Long Term Debt

Unlike the examples above, this one is a little less forgiving. People that experience natural disasters certainly don’t want to have their homes destroyed. People that post their spare rooms for short-term rental on the Internet should expect the occasional broken window, burst pipe, or overflowed toilet.

Sites like Craigslist and AirBNB make it easy for people to earn extra cash by offering a room to rent. In some high demand locations, people can demand hundreds of dollars per night. Unfortunately, damage caused by house guests is not covered by homeowner’s insurance. Many users’ experience with short term rentals involves at least one horrible house guest.

Some of the hilarity involving short term rentals includes:

  • Two Swedish women that discovered their Stockholm apartment had been used by guests as a brothel.
  • Robbery, vandalism, and identity theft.
  • Apartments being turned into makeshift meth dens.

Be careful when letting anyone into your home, especially if you just met them on the Internet.