In this article, we will be navigating through the global home insurance industry. We will also cover the 12 major home insurance exclusions you need to know about. If you wish to skip our detailed analysis, you can move directly to the 5 Home Insurance Exclusions You Need to Know About.

Global Home Insurance Market

According to a report by Spherical Insights, the global home insurance market was valued at $240.26 billion in 2023 and is expected to grow to $523.56 billion by 2033, at a compound annual growth rate of 8.10% over the forecast period. Supported by the primary house insurance market in the United States, North America is expected to hold the largest chunk of the global home insurance market over this period. Simultaneously, Asia Pacific will be the fastest-growing regional market.

The Collapsing US Home Insurance Market

Considering the dominance of the US home insurance market in the global landscape, an analysis becomes crucial. As reported by the Financial Times, America has been a victim of a home insurance crisis. While housing affordability issues are at their peak, insurance is not easy either. From January 2023 to February 2024, homeowner’s insurance cost in the country went up by 23%.

The major factor responsible for the crumbling home insurance market is climate change which has resulted in frequently severe and extreme weather conditions. National Oceanic and Atmospheric Administration revealed that the country witnessed a record 28 weather and climate disasters with losses totaling more than $1 billion in 2023. Homeowners residing in regions most vulnerable to fires and floods tend to suffer the most as they are subjected to sky-rocketing premiums from their insurers or these insurers simply leaving their regions.

For instance, 17% of homeowners in Louisiana saw a cancellation of their policy while 63% suffered from a higher cost of insurance coverage. Similarly, home insurance providers in California have raised their premiums due to the associated fire hazards. The state has recorded an average of over  7,000 wildfires each year. State Farm, one of the largest insurers in California, halted new home insurance sales in the Californian market in the summer of 2023. While the state’s insurance market remains troubled, the firm is seeking home insurance rate rises. A 30% rate rise for the insurer’s homeowners line, a 52% rate rise for renters, and a 36% rate rise for condominium owners are being requested which could be a heavy burden on the local homeowners. This move further intensifies the insurance crisis for millions of Californians considering the fact that State Farm was approved for a 20% hike for homeowners’ and condominium owners’ policies in December 2023.

Similar to State Farm, Farmers Insurance decided to limit new homeowners insurance policies in California. The company also exited the hurricane-prone Florida market last year when it stopped offering home, auto, and umbrella policies. With homeowners being left with high premiums and few options for coverage, the insurance market presents a demoralizing situation. Another factor playing its role in this scenario is the soaring rebuilding and replacement costs that insurers have been facing amidst inflation. Amidst such conditions, several homeowners in vulnerable regions have quit coverage due to the increasing unaffordability of their premiums.

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Homeowners Insurance: What Does It Typically Cover?

Home insurance is a package policy typically covering losses and damages to one’s home and personal possessions. Homeowners can also add popular optional coverages such as earthquake, flooding, or water backup coverage. Those who reside near a fault line can benefit from earthquake coverage while water backup coverage can cover losses where water backs up through sewers or drains.

Other than the dwelling coverage, homeowners might also need extended replacement cost coverage which allows adding to the dwelling coverage if the base amount cannot rebuild on its own, or guaranteed replacement cost coverage under which the homeowner insurance policy covers the cost to rebuild the house. Personal belongings that get stolen or damaged are often covered. Simultaneously, liability coverage takes care of any bodily injury or property damage to others. In case the homeowner is not able to live in the home due to a problem covered by the policy, the additional living expenses coverage pays the extra costs.

Story of a Leading Global Home Insurer

Chubb Limited (NYSE:CB) is a global insurance provider that offers commercial and personal property and casualty insurance through its subsidiary, Chubb. The insurer provides home insurance products for various kinds of homes including co-ops, condos, and custom-built houses. Chubb Masterpiece® Homeowners Coverage offers extended replacement cost coverage after a covered loss even if the cost surpasses the policy limit. It also makes temporary living arrangements while the home cannot be lived in and is being rebuilt. Even if the client doesn’t want to rebuild following the event of a covered loss, Chubb Limited (NYSE:CB) gives a cash settlement up to the client’s policy limit. In situations where one’s belongings inside the home get damaged, Chubb covers them for the amount it costs to replace them as of the current time, up to the limit one chooses their policy. Furthermore, homeowners policy from Chubb includes extra coverages for unexpected situations such as replacing a lock if keys get stolen or removing trees after a storm.

Chubb has the privilege of operating one of the largest product portfolios in the highly competitive global insurance industry, comprising over 200 distinct commercial insurance and reinsurance products and services. As a world leader in insurance, Chubb has a strong track record and position which remains well balanced by product and customer. Other than being the global leader in personal accident and supplemental health insurance, the company also dominates the traditional and specialty P&C coverage for businesses of all sizes. In the United States alone, the firm is the top personal lines insurer for high-net-worth families.

The broad-based diversified strength of Chubb was reflected in its strong second quarter which resulted in a record six months results. For these six months, core operating income was a record $4.41 billion, up 13.5% while net income was $2.23 billion, up 24.3%. Regarding this, Evan G. Greenberg, Chairman and Chief Executive Officer of Chubb Limited, commented:

“Total company net premiums increased 11.8%, with Global P&C up 11.2% and Life Insurance up 24.5%. Premiums in North America were up 8% and consisted of 12.3% growth in high-net-worth personal insurance and 6.7% growth in commercial, with P&C lines up 8.7% and financial lines down about 3%. For the rest of the world, our premiums were up more than 15.5%, with commercial up 13.3% and consumer up over 19%. Asia-Pacific, Latin America, and the Continent of Europe were up 32.9%, 13.7%, and 10.8%, respectively.

In summary, we had a great quarter, and, again, our results reflect the strength, breadth and depth globally of the company. We are confident in our ability to continue growing our operating earnings at a superior rate through P&C revenue growth and underwriting margins, investment income, and life income.”

The insurance company reported $57.5 billion of gross premiums written in 2023. Chubb’s underwriting results have outperformed the average of its peers over the last 10 years (2014-2023). The company remains consistently profitable as it has managed to grow its revenue by 10.35% and its income by 20.81% over the past 5 years. With an extensive local presence globally, robust financials, and consistent results, Chubb can prove to be an attractive choice for long-term investors seeking a solid performance.

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Now that we have looked at the global home insurance industry, let’s take a look at the home insurance exclusions you need to know about.

Our Methodology:

In order to compile a list of the home insurance exclusions you need to know about, we carried out a consensus. We sifted through multiple sources to gather a list of all the home insurance exclusions you need to know about. All the exclusions that appeared in more than 50% of our consensus sources have been ranked in our list.

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12 Home Insurance Exclusions You Need to Know About

12. Sewer or Drain Backups

A typical home insurance policy excludes damage from sewer or drain backups. Homeowners need to be mindful of this as additional coverage needs to be bought in such cases.

11. Home Businesses

Personal liability coverage is not extended to home businesses by home insurance. The business personal property coverage offered by most home insurance policies is also limited or simply excluded. Hence, home-based businesses need to cater to these damages themselves. For businesses that are home-based and larger, a separate business policy is recommended for coverage.

10. Acts of War

Acts of war are another known home insurance exclusion as home insurers don’t usually cover any damage or costs which result from an act of war. This exclusion includes declared and undeclared war, a nuclear war, or a civil war.

9. Certain Dog Breeds

Depending on the insurer, certain dog breeds are excluded from homeowners insurance. Typically, these breeds are considered to be aggressive and the injuries or damages they cause are not usually covered. While some insurers simply do not offer coverage for specific dangerous breeds such as Rottweilers and pit bulls, others might consider the aggression history of the breed.

8. Government Action

When public authorities engage in any action on one’s property such as taking over the land or confiscating belongings, home insurers cannot do anything about it. Thus, the damage or destruction to a homeowner’s property and belongings is an important home insurance exclusion people need to know about.

7. Nuclear Hazards

Standard homeowners insurance policies do not cover damage from nuclear events. This means that nuclear radiation, radioactive contamination, and explosions are excluded from home insurance.

6. Wear and Tear

Routine maintenance problems and general wear and tear are not covered or fixed by home insurance policies. Homeowners need to pursue maintenance work relevant to their homes timely. Hence, maintenance should be undertaken before major expenses need to be incurred.

5. Intentional Damage

If a homeowner or a family member intentionally damages the property, the home insurance policy cannot help under these circumstances. Hence, damage done on purpose is excluded from home insurance.

4. Mold

Depending on the root cause of the mold, it becomes an exclusion. Homeowners insurance might provide coverage if the mold is a result of a covered peril. However, it won’t cover it if the mold has developed gradually as a result of issues of poor maintenance or long-term leaking. Therefore, mold is another common home insurance exclusion.

3. Pest Infestations

Homeowners insurance does not cover the damage caused by termites, rodents, and other pests. To avoid repairs which might be costly in this situation, preventive measures should be timely undertaken to address such infestations.

2. Earthquakes and Earth Movement

Earthquakes, land shock waves, mudflows, and landslides are typically excluded from home insurance policies. Similar to the solution for flood damage, homeowners need to purchase a separate earthquake insurance policy especially if their home is in a location that is more vulnerable to earth movement.

1. Flooding

Damage caused by floods is most usually an exclusion in standard homeowners insurance. Typically, homeowners need to buy a separate flood insurance policy to protect them against flooding. For those residing in high-risk flood areas with federally funded homes, flood insurance is mandatory.

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Disclosure: None. This article was originally published on Insider Monkey.