Home Insurance Exclusions: 7 Costly Surprises You Need to Know

When I bought my first home, I assumed my insurance would cover everything. A storm, a broken pipe, even an unexpected disaster—I thought that’s exactly what the policy was for. But like many homeowners, I found out later that what’s written in bold on the front page isn’t the whole story.

The truth is, home insurance does protect you from certain big risks, but it also leaves out a surprising number of situations that can end up costing thousands of dollars. These gaps usually stay hidden until something actually happens—and by then, it’s too late to fix.

In this article, I’ll walk you through seven of the most common things home insurance doesn’t cover. My goal isn’t to scare you, but to help you spot these blind spots before they turn into expensive mistakes. By the end, you’ll have a clear sense of where you might need extra coverage or simple adjustments.

So let me ask you—when was the last time you actually read through your policy exclusions?

1. Flooding and Sewer/Drain Backups

When most people picture “water damage,” they assume insurance has their back. I used to think the same—that if a flood wrecked my basement, my policy would cover it. But here’s the catch: standard home insurance does not cover flood damage. That means even a single heavy storm could leave you footing a massive bill.

What makes this even riskier is that very few homeowners actually have separate flood coverage. According to AP News, only about 6% of U.S. homes are protected by flood insurance. Think about that—millions of families live in flood-prone areas but have zero coverage for it.

And it’s not just floods. Sewer or drain backups—like when heavy rains push dirty water into your home—are also excluded unless you’ve specifically added a water-damage endorsement to your policy. It’s one of those details buried in the fine print that many people discover only when they’re knee-deep in the mess.

If you’re in the market for a new home, it’s not just about the neighborhood or price—you also need to consider risks like flooding and long-term value retention. Knowing the smart signs a home will retain its value can help you make a choice that stands strong both financially and in terms of insurance needs.

Here’s what you should know:

• Flooding → Not covered by default. You need a separate flood insurance policy.
• Sewer/Drain backups → Excluded unless you buy an endorsement (often just a small add-on, but can save you thousands).
• Regular water leaks vs. sudden bursts → A slow leak usually isn’t covered, but a sudden pipe burst often is.

If you’ve never checked your policy for these water-related gaps, now’s the time. Ask yourself: Could I handle a $20,000+ repair out of pocket if my basement flooded tomorrow? If not, it’s worth exploring extra protection.

2. Earthquakes, Landslides & Sinkholes

Let’s talk about another big risk that often flies under the radar—ground movement. Whether it’s an earthquake shaking your walls, a landslide damaging your foundation, or a sinkhole swallowing part of your yard, these disasters are not covered under a standard home insurance policy.

I’ve seen homeowners assume, “If the earth moves and my house cracks, insurance will help.” Sadly, it won’t. Unless you live in a state like California or Florida where this is common knowledge, most people never even think about it until disaster strikes.

Here’s the reality:

• Earthquakes → Always excluded unless you purchase separate earthquake insurance.
• Landslides → Seen as “earth movement,” so not included in regular coverage.
• Sinkholes → Surprisingly, most policies don’t cover them either. Some states require separate sinkhole insurance.

Now, here’s where it gets tricky: earthquake coverage is available, but it usually comes with a high deductible and premiums that depend heavily on where you live. If you’re in an area with even moderate earthquake risk, it’s something to seriously consider.

My advice? Even if you don’t live in California, review your local risks. A small sinkhole in your area, or minor seismic activity, can lead to huge structural repairs. Better to ask your insurer upfront about add-ons than to assume you’re safe.

3. Mold and Pest Infestations (Including Bed Bugs, Termites, Rodents)

Mold is one of those sneaky problems that starts small and then suddenly takes over walls, ceilings, or entire rooms. Here’s the frustrating part: insurance usually won’t cover it unless it comes from a sudden accident like a burst pipe. If the mold grew because of a slow leak you ignored, or just everyday dampness, you’re on your own.

Pests fall into the same category. Termites, rodents, and bed bugs cause thousands of dollars in damage every year, but home insurance sees them as a “maintenance issue.” That means if termites eat through your beams or mice chew up your wiring, you won’t get a payout.

Here’s the breakdown:

• Mold from sudden water damage → May be covered.
• Mold from long-term leaks or humidity → Usually not covered.
• Pests (termites, rodents, bed bugs) → Excluded from standard policies.
• Accidental animal damage (like a raccoon smashing through your attic) → Sometimes covered, but you need to confirm with your insurer.

My advice? Stay proactive. Regular inspections and quick repairs are your best defense here. Waiting even a few weeks to fix a leak or pest issue can turn into thousands in uncovered damage.

4. Wear-and-Tear, Neglect & Maintenance Issues

One of the biggest surprises for homeowners is that insurance doesn’t cover things that break down over time. If your roof is 25 years old and starts leaking, that’s considered “wear and tear,” not a sudden loss. Same goes for old pipes, outdated electrical wiring, or crumbling foundations.

I’ve seen claims denied simply because the insurer decided the problem came from neglect or lack of upkeep. And the harsh truth is, they’re usually right—insurance isn’t designed to replace things you should be maintaining.

Here’s what typically isn’t covered:

• Aging roofs that leak due to old shingles.
• Plumbing issues from years of corrosion or poor maintenance.
• Foundation cracks caused by long-term settling.
• Gradual wear on systems like HVAC or electrical.

Another big pitfall? Auto-renewals. A lot of us just let our home insurance roll over each year without checking whether the coverage still matches the home’s value. As MoneyWeek points out, this can leave you underinsured—especially if inflation, renovations, or rising rebuild costs have changed your risk profile.

Don’t wait until a claim is denied to discover these gaps. Do a yearly check-up on both your house and your policy. Keeping records of repairs and updates not only protects your home, it strengthens your case if you ever do need to file a claim.

Buying a home isn’t just about getting the keys—it’s about planning for maintenance, repairs, and future costs. That’s why understanding the benefits of buying a home can help you see the bigger picture, beyond just the monthly insurance premium.

5. Home-Based Businesses & High-Value Collections

A lot of us run side hustles or even full-fledged businesses from home these days. But here’s the part most people miss: your standard homeowners policy doesn’t fully protect business property. In fact, coverage is usually capped at around $2,500—barely enough to replace a laptop, let alone an entire setup. According to Policygenius, you’ll need a business endorsement or a separate policy if you want proper protection.

It’s not just business owners who face this problem. If you keep expensive jewelry, art, or collectibles at home, your insurance probably has strict payout limits on those too. For example, a policy might only cover $1,500 worth of jewelry, even if you own a $10,000 ring.

Here’s the breakdown:

• Business equipment (computers, tools, inventory) → Limited coverage unless you add an endorsement.
• Home-based liability (client visits, shipments, accidents) → Usually excluded from standard policies.
• High-value items (jewelry, fine art, coin collections) → Need special riders or scheduled coverage.

If you’ve invested years into building a home office, or if you have valuables you couldn’t easily replace, don’t rely on default limits. Ask your insurer about endorsements—it’s cheaper than finding out too late that your claim won’t cover the loss.

6. Intentional Damage and Certain Dog Breeds

Another area where homeowners often get blindsided is liability coverage. You probably assume if something happens at your house, you’re covered—but that’s not always the case.

First, insurance will never cover intentional damage. If a resident of your home damages the property on purpose—whether out of anger, carelessness, or fraud—you won’t see a dime from your insurer.

Second, pets can create another hidden gap. Many people don’t realize that certain dog breeds are excluded from liability coverage because insurers consider them “high risk.” That means if your dog happens to fall on that list and bites someone, you could be on the hook for medical bills and legal costs.

Here’s the quick summary:

• Intentional acts → Always excluded, no exceptions.
• Dog liability → Some breeds may be excluded; you’ll need to check your policy carefully.
• Accidents by kids, guests, or pets → Covered only if they’re not on the insurer’s exclusion list.

If you have a dog, or if you’re worried about any liability scenario, this is one section of your policy you should read word for word. It could save you from an ugly surprise later.

7. Coverage Loopholes, Auto-Renewal Pitfalls, and Policy Gaps

Here’s the thing about insurance—sometimes you think you’re protected, but small details can leave you exposed. One of the biggest traps is auto-renewal. Most of us just let our policies renew each year without really checking what’s inside. The problem? Your home’s value changes, building costs go up, and maybe you’ve done renovations or upgrades. If your coverage hasn’t kept pace, you could be badly underinsured.

Another common loophole comes from missed add-ons. For example, you may have upgraded your home office or bought expensive jewelry, but if you never told your insurer, those items might not be fully protected. Insurance companies won’t automatically adjust your policy—you have to stay on top of it.

Many first-time buyers don’t realize how coverage limits and loan structures can affect their long-term financial safety net. Before auto-renewing any policy, it’s wise to review financing basics like the top home loans every first-time buyer should know to make sure your coverage aligns with your mortgage and property value.

Here are the biggest risks to watch out for:

• Auto-renewal complacency → Policy keeps rolling over without matching rising rebuild costs.
• Renovations or upgrades → New additions might not be covered unless you update your insurer.
• Value shifts → Inflation or rising labor/material costs can leave coverage limits outdated.
• Missed endorsements → High-value items or business assets may be excluded if not declared.

The lesson is simple: don’t set it and forget it. Review your policy every year, update your coverage when life changes, and ask questions before assuming you’re safe. That small effort can be the difference between a smooth claim and a financial disaster.

Don’t Wait for a Claim to Discover the Gaps

Home insurance is meant to give peace of mind, but the truth is, it only works if you understand what it doesn’t cover. Floods, ground movement, mold, pests, wear and tear, home businesses, valuables, intentional damage, even policy loopholes—these blind spots can turn into financial shocks if you’re not proactive.

The smart move isn’t just buying a policy—it’s managing it like the investment it is. Review your coverage every year, talk with your insurer, and add endorsements where your life demands it. A little attention now can save you from a massive loss later.

I’d love to hear from you—have you ever faced a surprise insurance denial, or caught a gap just in time? Drop your story in the comments so others can learn from it.

And if you want more real-world guides that help you protect your home and money, visit Build Like New for fresh insights that go beyond the fine print.

Disclaimer: This article is for informational purposes only and should not be taken as legal or financial advice. Insurance policies vary, so always review your own policy documents and consult a licensed insurance professional before making decisions.