You just found out that you need foundation repair on your home and are trying to figure out how to pay for it. First thought: Oh yay! My favorite thing!
Natural second thought: Will my homeowner’s insurance policy cover it by any chance???
This is a legit question that will run through most homeowner’s minds so you are right to check on this possibility. The answer to this question is complex, of course, as are most things about insurance. We asked a few insurance agents and did some research of our own to help get this answered for you.
At Anchor Foundation Repair, we have been inspecting and repairing foundations in the Bryan, College Station, and Brazos Valley areas for the past 35 years. Anchor also has a primary mission to help answer any homeowner questions related to foundation repair.
We want to serve as a resource for you because we’re just nice and helpful like that. It’s who we are, it’s what we do.
This article will cover the basic parts of a homeowner’s insurance policy, typical coverages and exclusions, and where you will most likely find a way for foundation repair to be covered by insurance.
What Types of Coverage are there in Homeowner’s Insurance?
According to Jen Baily at Baily Insurance, there are 6 typical coverage types in a normal homeowner’s policy.
- The Main Structure – i.e. your actual home aka dwelling in insurance-speak
- Other Structures – such as a detached garage, detached carport, or shed
- Personal Property – all the stuff inside your home aka contents
- Additional Living Expenses – coverage for an alternate living arrangement if you are forced to move out of your home because of the claim incident
- Medical Coverage – if someone is injured on your property, this can help cover their medical expenses like x-rays, stitches, or an ER visit
- Liability Coverage – this covers you if you are sued because someone is injured on your property
The places where foundation coverage is possible are found under item number one and number two. Homeowner’s insurance is designed to provide protection for damage to your home from a variety of causes, but not all causes are covered. Let me repeat that: not all causes are covered.
So, the important thing to hone in on here is THE CAUSE of the problem. Causes in the insurance kingdom are called perils. There are terms like “open perils” and “excluded perils.” Sounds dangerous or something, doesn’t it? But let’s find out what that means because it’s important in understanding your insurance coverage.
“Coverage for the home (or dwelling) is typically considered ‘open perils’, which means that all damage is covered unless specifically excluded,” according to Brandon Eisenman, Managing Director of W.E. Gibson Insurance, a Dean & Draper Company. “Excluded perils on homeowners policies include things such as flood, damage from insects, wear and tear, war and nuclear damage, earth movement, and maintenance-related items,” continued Eisenman.
Side note: Isn’t it comforting to know that war and nuclear damage are not covered? I feel so much better now, don’t you? Additional side note: Avoid nuclear war.
In the next two sections, we give you a more thorough list of examples of things that are considered “open perils” and “excluded perils.” Ultimately, you would need to check your specific insurance policy to look for your exact list, but this will give you some idea of what we are talking about.
Open Peril Examples
Typical causes that homeowners insurance covers are things like the following. Usually, these are things that can be identified as happening on a particular day or can be given a specific incident date.
- Damage from snow or ice
- Damage caused by vehicles or aircraft
- Falling objects
- Fire and/or lightning damage
- Hailstorms and windstorms
- Riots or civil disturbances
- Volcanic eruptions
- Water damage from plumbing or HVAC issues
If somehow your true foundation damage is a direct result of one of these perils, and the date of the event can clearly be identified, then your homeowners’ insurance would likely cover the cost of repairs after your deductible and up to the limits identified in the structure coverages.
According to Baily, “Generally, something is not covered if the damage occurs due to something other than a covered peril. Your homeowner policy should include a list of perils that your insurance company covers.”
Most of the things listed above are not particularly likely to happen. I mean, not saying that a car couldn’t slam into your house and break your foundation, I suppose it could. But it’s not really all that likely and nowhere near the most common cause of foundation damage.
But hey, if your house exploded and the foundation was damaged, rest assured that you would be covered on that as long as it’s a covered peril.
There is one thing on this list that is more likely to be a direct cause of foundation damage and that is the “water damage from plumbing or HVAC issues.” We will talk about that more specifically later in the article.
Common Excluded Perils
Insurance policies will typically exclude certain things. Flooding is a common exclusion on a regular homeowner’s policy and people have to buy a separate flood policy to be covered by flooding. Same for earthquakes, separate earthquake policies have to be purchased because earthquakes are usually an excluded peril.
Some things are excluded altogether and there are no additional policies or extra coverages available to add to your policy. Here’s a list of commonly excluded perils.
- Drought or lack of rainfall
- Earthquakes – separate policies available
- Failure to maintain the property
- Faulty construction
- Flooding – separate policies available
- Natural foundation settlement or earth movement
- Normal wear and tear
- Pressure from tree roots
- Sewer line backups or city-side infrastructure failures – separate policies available
So it is looking like most foundation issues are going to be excluded perils because the usual causes of foundation settlement are not caused by a specific cataclysmic event. The usual causes of foundation problems are gradual happenings over many years like climate/moisture levels, normal settlement, tree root intrusion, or in some cases plumbing leaks.
What is the Most Likely Way Foundation Damage can be Covered by Insurance?
The plumbing leak is the one case where it seems that some insurance policies might include it as an open peril and not specifically exclude it, OR it could be extra coverage that you have added to your policy.
If you can tie your foundation problem directly to the cause of a plumbing leak, and that is not specifically excluded from your policy, then you may be covered for the foundation repair and access to the plumbing repair (though not the plumbing repair itself). It seems to be a particular peril that could go either way as it is listed as a possible open peril but could very likely be excluded as well.
As far as we can tell, this is the most likely normal cause of foundation problems that has any real potential to be covered. While there are the other “open peril” instances that could be covered, some of them are unlikely to ever happen. Like seriously, when is the last time you heard of an act of vandalism damaging someone’s foundation?
Reading through insurance policy paperwork is intimidating and a little hard to understand. You would want to ask your insurance agent if either the plumbing leak instance is included as an open peril on your policy or ask if you happen to have the special endorsement coverage.
This is only applicable if your foundation problem was originally caused by a plumbing leak – any other normal cause of foundation settlement is not going to be covered.
What Does an Insurance Policy Say if You Have a Foundation and Water Damage Endorsement?
“There is typically an exclusion for damage to concrete slabs and pipes below the surface of the ground, but many companies offer extra coverage at a set limit that you can ‘buy back’ by endorsement,” according to Eisenman.
Purchasing an endorsement for “Foundation and Water Damage Coverage” is an extra item that gets added to your policy. It is not something that automatically gets included so you would have had to at some point told your insurance agent that you wanted this coverage added or selected this option during the purchasing process.
Here is some actual wording from a “Foundation and Water Damage Coverage” endorsement:
“We cover settling, cracking, shrinking, bulging, or expansion of the foundation, floor slab or footings that support the dwelling caused by seepage or leakage of water or steam from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system.”
“This coverage includes the cost of tearing out and replacing any part of the building necessary to repair the system from which the leakage or seepage occurred. We do not cover loss of the system from which the water or steam escaped.”
According to Eisenman, an endorsement of this kind would likely be adding between $50 to $100 in cost per year to your insurance premium. The coverage also has a set limit and doesn’t go all the way up to the full amount listed on your regular dwelling policy.
Here is an example of what a “Foundation and Water Damage Coverage” Endorsement might actually say about this monetary limit of the coverage:
“Our limit of liability for this coverage will not exceed an amount equal to 15% of the Coverage A limit applicable on the date of loss or $25,000, whichever is less. This is the most we will pay for the total of all loss or costs per policy period regardless of the number of losses or claims made.”
If Insurance Won’t Cover It, How CAN I Pay for Foundation Repair?
So, we have established that yes there are times that foundation damage can be covered by insurance. Like if your home is hit by a plane and it damages the foundation, then you are good with an open perils policy.
Also, if plumbing leaks are not specifically excluded OR you have a special endorsement for foundation and water damage, then the foundation repair could be covered only if it was directly caused by the plumbing leak.
Other than those kinds of specific instances, you are on your own in paying for foundation repairs.
Out of the hundreds of foundation repair projects that we complete in a year at Anchor Foundation Repair, we can share that about 3 or 4 per year have some element of insurance coverage, while the vast majority of them do not. We are always happy to help work with insurance companies whenever needed, but 35+ years of experience tell us that it doesn’t happen that often.
We do have some ideas for you on how you can pay for foundation repairs. We know that is the next likely question you have, so check out our article about it: “How to Pay for Foundation Repair with Anchor: Payment Types, Plans, Financing.”