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7 homeowners insurance gaps that could cost you

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Is your homeowners or renters insurance policy disaster ready?

Roughly 5 percent of insured homeowners filed a claim in 2014 (the latest year available), according to data from ISO, a division of Verisk Analytics. The average claim: $10,750.

"From a coverage perspective, it's very important to make sure they're prepared for the worst situations," said Angi Orbann, second vice president of personal insurance for Travelers.

Experts say a common gap is not having enough coverage. If your coverage is less than 80 percent of the home's replacement value, insurers may only reimburse you for a portion of damages.

Your home should be insured for the cost to rebuild, which isn't the same as its market value, said Orbann. Rising costs for building materials or improvements you made to the home might also mean you're under-insured, even if you initially had adequate coverage.

Here's how to make sure your policy is ready for seven kinds of claims that are among the most common or costly.

— By CNBC's Kelli B. Grant
Posted 29 April 2016

Windstorm
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Risk: Windstorms are the most common cause of home damage, accounting for 25 percent of claims from 2009 to 2015, according to a recent Travelers analysis. They're also among the costliest claims, the report found, representing 18 percent of losses. ISO estimates the average wind and hail claim at $8,041.

Policy Prep: Homeowners can have deductibles as small as $500 before coverage kicks in, but check to see if your policy has a separate windstorm or hurricane deductible. "This is different than your regular, standard deductible," said Loretta Worters, a vice president for the Insurance Information Institute.

Windstorm deductibles are typically a percentage of the insured value of your home instead of a flat dollar figure, she said, and can range as high as 5 percent. So someone with a $250,000 home might have a windstorm deductible of as much as $12,500.

Deductible rates vary, as do which circumstances trigger a hurricane or windstorm deductible. It's worth shopping around to compare, especially if you live in a storm-prone area, Worters explained.

Fire
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Risk: Fire is the priciest cause of home damage, accounting for 23 percent of total claim costs from 2009 to 2015, according to Travelers. The average claim for fire and lightning damage: $39,791, per ISO data. But fire and lightning claims are relatively rare. From 2010 to 2014, the claim rate averaged 0.38 per 100 policies, according to ISO.

Policy Prep: An inventory of possessions is smart preparation for any disaster, but it's especially vital for situations like a tornado or fire where there's the potential for total loss, said Orbann. Without that, it's tough to recall what's on every shelf and in every drawer.

"Go room by room, documenting your belongings," she said. You could go low tech with a list, or take pictures or video — there are a number of apps, too, to help with cataloguing. Keep it updated, especially with big-ticket purchases, and store it along with other important documents in a watertight, fire protected safe.

Check your policy to make sure your home contents are covered for their replacement value, rather than their cash value, Orbann said. The latter factors in depreciation, so you might only get $400 to replace the TV you paid $1,000 for a few years ago.

Dog Bites
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Risk: In 2014, dog bites and other dog-related injuries accounted for more than a third of all homeowners insurance liability claims, according to data from the Insurance Information Institute and State Farm. There were 4.7 percent fewer incidents that year than in 2013. The average cost per claim was $32,072, up a little over 15 percent from a year earlier.

Policy Prep: Some policies may be more pet friendly than others. Depending on the state and insurer, you might be subject to a lower coverage limit compared with other liability claims or be required to purchase more coverage. "They might exclude coverage altogether if you have a certain dog breed," said Peter Kochenburger, executive director of the University of Connecticut's Center for Insurance Law.

Insurers usually ask about pets as part of your application, but if you own a dog, check to see what your insurer's policy is. "This is precisely the thing you want to know about before a claim is filed, not after," he said. Ask about pet coverage when you're shopping for a new policy, or if you're considering adding a dog to the family.

Theft
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Risk: Theft is the fifth most-common homeowners insurance claim, accounting for 6 percent of them during 2009 to 2015, according to Travelers. The average loss runs $3,786, according to ISO.

Policy Prep: Pay attention to policy sublimits, which cap coverage for valuables such as electronics, jewelry, musical instruments, comics, artwork and antiques, among other categories. "It's something you should generally ask about," said Orbann. Thresholds can be low — it's relatively easy to exceed them with commonly owned items such as a cutting-edge television or an engagement ring. Policy limits on cash are often a scant $200.

Coverage limits for valuable items are easily remedied with a rider or endorsement, she said. (You might also look into underwriters who specialize in insuring particular categories, such as photography equipment or jewelry.) Expect to provide an appraisal, receipts or other records documenting the items' value.

Ask about policy discounts for any theft-deterrent measures in place, such as a security system, said Worters. Valuables also provide another reason to consider replacement coverage on your home's contents, and keep an updated home inventory.

Non-Weather Water Damage
A plumber fixes a leaking pipe.
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Risk: Water damage that isn't related to weather — such as plumbing and appliance problems — represents the second-most-common claim cause, accounting for 19 percent of them from 2009 to 2015, according to Travelers. It's also the fourth costliest, at 11 percent of losses. (Pipes that freeze and then burst fall into weather-related water damage.)

Policy Prep: This kind of water damage is usually covered as a matter of course, but for some insurers, older pipes can trigger higher premiums for exactly this risk, said Worters. If you upgrade your plumbing as a standalone project or as part of a bigger renovation, let the insurer know — you might qualify for a better rate.

Insurers may also offer discounts for having an alarm system that senses leaks or alerts you if water is detected, Orbann said.

Flooding
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Risk: In 2015, the Federal Emergency Management Agency declared 29 disasters involving flooding. People outside high-risk flood areas file more than 20 percent of all National Flood Insurance Program claims, according to FloodSmart.gov. They put the average claim at nearly $42,000 from 2010 to 2014.

Policy Prep: "Flood is not covered by your homeowners policy," said Kochenburger. You'll need to obtain a separate flood insurance policy through the National Flood Insurance Program or a private insurer. There's a 30-day waiting period for new policies to take effect, he said. (FloodSmart.gov offers a tool to help you assess your risk and find insurer options in your area.)

Got flood coverage? There may still be other gaps to consider. Check your regular homeowners policy to see if you're covered for sewer backup, which isn't flooding but can result in similar damage, said Worters. You may need to obtain a separate rider.

Flood and homeowners policies may not cover much by way of personal possessions in the basement, either, so think twice before stashing valuables there or doing a pricey remodel.

Bodily Injury
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Risk: Bodily injury and property damage claims are the second costliest, by ISO data, averaging $20,453 from 2010 to 2014. They are relatively rare, though. Over that same period, they averaged just 0.10 claims per 100 policies.

Policy Prep: It's easy to estimate how much property coverage you need based on the cost to rebuild your home, but liability is tougher, said Kochenburger. A small amount of coverage might be enough to take care of the medical bills of a guest who slips in your home, for example, but not if someone who falls on your icy sidewalk decides to sue for negligence.

"Generally on liability, it makes really good sense to have an umbrella policy," he said. That helps shield personal assets in the event of a lawsuit. The Insurance Information Institute estimates the annual cost at $150 to $300 per year for a $1 million policy.