Despite the efforts made by organizations towards laws that would prevent manipulations designed by an insurance company to limit coverage without the consumers knowledge, we are experiencing a vast change in coverage through the use of policy endorsements (which are added) to the policy.

These endorsements scream “buyer beware” because of the limitations or exclusionary language that ultimately threatens the essence of indemnification after a major loss occurs.

Insurance companies over the past couple of years have creatively added endorsements that present changes and limitations to protections sought by “You” the consumer.  Homeowners may potentially be unaware of the various endorsements added to their policy, the meaning, the limitations and or possible exclusions.

When purchasing or renewing their policy, homeowners may be left to assume their home is covered mainly because the broker or agent did not explain the limitations or exclusions or that the homeowner did not know to ask about them.

Hence, the homeowner runs the risk of learning of these changes by endorsement after a major loss occurs which almost more times than not costs thousands of dollars. Why do we have insurance? I thought I was covered.

No one told me! Nonetheless, the damage is done, and the homeowner is left with major structural, personal and economic damage with limited or no coverage at all.

To ensure that your policy is working for you it is imperative that you review your policy, (ignorance is not an excuse in the eyes of the law) ask your agent or broker questions about your coverages and try not to sign any document that may be perceived as if you are waiving your rights with your broker or agent unless you are satisfied with the knowledge you obtained from them and are comfortable with the coverages and limitations provided in your insurance quote.

The average homeowner does not have insurance claims knowledge or experience with the types of risk exposures they are susceptible to. Hence grossly disadvantaged from the start. Homeowners (especially first-time buyers) are told that they need to bind Fire Insurance coverage to close the deal on their new dream home.

Today in many cases Flood Insurance is also required by the mortgage company.

They engage an agent or broker and purchase fire insurance and flood insurance and close the deal with a false pretense that their dream home and investment will be covered. Unfortunately, this is not the case for many homeowners who suffered a loss and learned it the hard way.

Homeowners are not aware of the level of risk their new dream home faces and the necessity to insure their dream home against those potential risks.

Some of the most common losses to any home are a pipe break, sprinkler system break, overflow of water from the dishwasher, toilet float overflow, clogged drain lines within the structure causing sewage to back into the home, pipe freeze (sometimes causes more damage than a fire) water main line break, HVAC system malfunction or break, shower body line break, roof drain line break or clog, drain line break, toilet tank rupture, hot water heater malfunction, low water cutoff malfunction and overflow, boiler damage, washing machine malfunction or overflow and so on.

It is these common everyday types of losses that the water endorsement attempts to limit.

In any given peril scenario listed above the cost to the homeowner for their structural damage, personal property damage, rental loss damage (if applicable) and loss of use damage can potentially be economically catastrophic. Buyer Beware!

The water endorsement” (see below) should peak your concern enough to review your policy, send an email to your agent or broker and inquire with them on whether your carrier has implemented a water endorsement (or other endorsements) so that they are aware of any potential coverage limitations.

This may be the case with State Farm policyholders because it appears that State Farm has embarked upon implementing this water endorsement to their policyholders with no real solution on how they will educate and inform their policyholders and future prospective policyholders about the water endorsement and the potential economic danger a homeowner can face with this type of coverage limitations.

Water Endorsement in Relevant Part; “Section 1 Property Coverage”: The following provision is added to this policy.

“Special limit for Water Damage. The total limit for property Covered under Coverage A- Dwelling and Coverage B – Personal Property combined is $5,000. This limit only applies to losses insured caused by water damage as described below. This limit is the most we will pay in any one policy period (policy term) regardless of the number of losses insured that combine or contribute to cause the loss or the number of claims made during the policy period. The following conditions apply;

The special limit for water damage applies as follows.

• For coverage A: Dwelling, the limit only applies to a loss insured consisting of water damage caused by;

Abrupt and accidental discharge or overflow of water, steam or sewage from within a plumbing, heating, air conditioning, automatic fire protective sprinkler system or from within a household appliance.

Abrupt and accidental tearing asunder, cracking, burning or bulging of a steam or hot water heating system and air conditioning system, an automatic fire protective sprinkler system or an appliance for heating water, or FREEZING of a plumbing, heating air conditioning, fire protective sprinkler system or of a household appliance.

A water pipe break from a 2nd-floor bathroom can cause major catastrophic damage. Having a $5,000- $25,000.00 limitation can and will place homeowners in severe economic turmoil.

The cost of emergency service water mitigation services can exceed this limitation. The cost to repair and replace the structure and personal property will become the burden of the homeowner with this type of water endorsement in place.

Finally, an educated guess is, that carriers such as State Farm will make it appear enticing to the policyholder providing them with an option to reduce the coverage which by the way has a min.

$5,000 to max $25,000 limit without providing any further information to the homeowner. The water endorsement should be avoided at all costs. The savings is insignificant in comparison to the cost to the homeowner post-loss.

Samantha Zherka is the founder of  Nespo Insurance Claims Services, a public advocacy adjuster service.  For more information on Insurance Claims, you may contact Samantha Zherka at 718-518-7100 or 347-497-9563.