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Insurance can provide a safety net for individuals who worry about their property or purchases. However, most insurance policies come with a long list of exclusions that can leave policyholders out in the cold when the unforeseen happens. By knowing what typically is and isn't covered, consumers can know when buying extra protection may be needed. After reading through dozens of home, auto, and travel insurance filings these are some of the most surprising exclusions we've come across.
Terrorist Acts. Many individuals get travel insurance in order to protect their itineraries from sudden events that may cause a change of plans. However, if you are traveling to a high-risk area, your policy may not necessarily cover you in the event your trip is cancelled due to a terrorist act. In such cases, the insurer may consider the event a "known peril" and choose not to pay out damages. Always check the policy to see whether there are any time specifications regarding previous activity as well.
Interestingly enough, our research found that your car's comprehensive coverage may protect it from damage resulting from terrorism. It is one of the few personal lines of insurance to explicitly protect against such an event.
Expert Tip: If you use some travel credit cards to pay for a trip, you may automatically qualify for travel accident insurance. In some of the best ones, you may also qualify for trip cancellation and lost luggage insurance. However, just as with regular travel insurance, double check with the policy before you book your travel - terrorist acts may not be covered in all instances.
Nuclear Explosions And War. If the United States Congress declares war on another nation, and that country were to attack us and damage your car or home, your insurance policies would not cover the cost. Such stipulations exist in virtually all insurance policies. The reason for this is chiefly financial. If a war were to break out on U.S. soil, the number of claims that would hit insurance companies would be tremendous - potentially even greater than those from Hurricane Katrina. Such an event would have the potential to put insurers deep in the red.
Floods. Standard home insurance policies do not cover your property against damage that results from floods. You need to buy separate flood insurance coverage in order to cover the structures of your home as well as its contents. Even by getting a separate flood insurance policy not everything may be covered. For example, there exist limitations on the type of contents that may be covered if it is kept below the first floor of your home.
Expert Tip: Be aware of category limits on your coverage. For example, artwork and furs will typically only be covered up to $2,500. If you have a collection that is worth significantly more, consider whether or not you want to pay a little bit more for higher coverage limits.
Mold. Whether or not your home insurance policy will cover mold damage comes down to what caused it. If the mold grew due to water damage or the homeowner's neglect, it won't be covered. However, if the mold was a result of something that your insurance policy does cover, such as a burst pipe, they will cover it by extension.
Sinkholes. Despite at least 20 percent of the geological landmass in the United States being susceptible to sinkholes, most home insurance policies will not cover damages that result from it. Furthermore, if a sinkhole has already caused structural damage to a property, insurers are likely to discontinue coverage to the affected area.
Expert tip: Sinkhole insurance can be quite pricey, so you will want to weigh the odds of your home being at risk of one. The Insurance Information Institute puts the odds of a catastrophic sinkhole occurring in any given year at 1 in 100.