Key Takeaways
- FLOOD is NEVER covered by homeowners policies — requires separate NFIP (National Flood Insurance Program) policy
- EARTHQUAKE requires a separate endorsement or policy — not covered under standard homeowners
- Business pursuits and professional liability are excluded from BOTH Section I and Section II
- Motor vehicles are excluded from liability (Section II) — must use auto policy
- Intentional acts by the insured are always excluded — you cannot insure against your own deliberate damage
Homeowners Exclusions
Knowing what's NOT covered is just as important as knowing what IS covered. Exclusions are heavily tested on the P&C exam.
Section I (Property) Exclusions
Catastrophic Exclusions
These perils are excluded because they're catastrophic risks that would bankrupt insurers:
| Exclusion | Reason | Alternative Coverage |
|---|---|---|
| Flood | Correlated, catastrophic | NFIP policy |
| Earthquake | Regional, catastrophic | Earthquake endorsement |
| Earth movement | Landslide, sinkholes | Difference in Conditions (DIC) |
| War | Uninsurable | None |
| Nuclear hazard | Catastrophic | None |
Exam Alert: FLOOD is the #1 tested exclusion. It is NEVER covered under standard homeowners, even if caused by a covered peril like a hurricane.
Maintenance and Wear Exclusions
The insured is responsible for maintaining the property:
| Exclusion | Why Excluded |
|---|---|
| Wear and tear | Normal deterioration |
| Rust, corrosion | Maintenance issue |
| Mold, wet rot, dry rot | Preventable |
| Vermin, insects, rodents | Pest control responsibility |
| Birds, animals | Maintenance issue |
| Settling, cracking | Normal building movement |
| Mechanical breakdown | Warranty issue, not insurance |
Water-Related Exclusions
Water damage is complex — some covered, some not:
| Excluded Water Damage | Covered Water Damage |
|---|---|
| Flood (surface water) | Sudden pipe burst |
| Sewer backup | Accidental overflow |
| Seepage or leakage | Rain through wind-damaged roof |
| Groundwater | Ice dam water |
| Rising water | Fire department water |
Key Point: Sudden and accidental water damage = covered. Gradual damage or flood = excluded.
Other Section I Exclusions
| Exclusion | Notes |
|---|---|
| Intentional loss | By insured or at their direction |
| Government action | Seizure, confiscation |
| Power failure | Off-premises utility failure |
| Neglect | Failure to protect property |
| Vacancy > 60 days | Vandalism excluded; other losses reduced 15% |
Section II (Liability) Exclusions
Motor Vehicle Exclusion
One of the most important exclusions
Motor vehicles are excluded from homeowners liability because:
- Auto policies cover motor vehicle liability
- Prevents duplicate coverage
What's Excluded:
- Cars, trucks, motorcycles
- ATVs and golf carts (off your property)
- Snowmobiles (off your property)
What's NOT Excluded:
- Golf carts used only on golf course
- Motorized wheelchairs
- Riding lawn mowers (while mowing)
- Recreational vehicles on your property
Business Pursuits Exclusion
Home businesses are generally excluded:
| Excluded | Alternative |
|---|---|
| Business liability claims | Commercial General Liability |
| Professional services | Professional Liability (E&O) |
| Home daycare (more than few kids) | Daycare Endorsement |
| Rental of property to others | Dwelling policy |
Exception: Incidental business activities (like occasional babysitting) may be covered.
Other Section II Exclusions
| Exclusion | Reason |
|---|---|
| Intentional injury | Cannot insure deliberate acts |
| Contractual liability | Assumed liability not covered |
| Workers' compensation | Separate coverage required |
| Watercraft | Boats over certain size |
| Aircraft | Aviation liability separate |
| Property you own/rent/control | First-party, not third-party |
Concurrent Causation Exclusion
What It Means
If an excluded peril and covered peril combine to cause a loss, the exclusion controls.
Example
Hurricane causes:
- Wind damage (covered)
- Flood damage (excluded)
Result:
- Wind damage: Covered
- Flood damage: NOT covered
- Even if impossible to separate: Courts may deny entire claim under anti-concurrent causation clause
Common Exam Scenarios
Scenario 1: Sewer Backup
Water backs up through the sewer into basement.
Standard policy: NOT covered (sewer backup excluded) With endorsement: Covered if Water Backup endorsement purchased
Scenario 2: Earth Movement
Earthquake cracks foundation; rain enters through cracks.
Standard policy: NOT covered (earth movement excluded) Note: Even the resulting rain damage may be excluded
Scenario 3: Home Business Injury
Customer visiting home office falls and is injured.
Standard policy: NOT covered (business pursuits excluded) Solution: Home Business endorsement or commercial policy
A hurricane causes both wind damage and flood damage to a home. The homeowners policy will:
A customer is injured while visiting a home-based business. The homeowners policy will:
Which of the following water damage scenarios would be COVERED under a standard HO-3 policy?
4.6 Homeowners Conditions
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