Facing A Failing Foundation? What Damage Will Your Homeowners' Insurance Cover?

If you've always assumed any cracking, water damage, or other structural damage your foundation may sustain over the years would be fully covered by your homeowners' insurance policy (minus deductible), you may be in for an unpleasant surprise when you attempt to make a claim. Unless you've carefully reviewed your insurance policy in detail recently, you may be assuming you have coverage that no longer exists. Indeed, one Senator recently pointed out the impact that excluding "failing foundations" is having on many Connecticut homeowners, with these systemic problems sometimes leading to six-figure repair bills. 

What should you know about foundation problems--and what can you do to ensure you're protected? Read on to learn more about the types of foundation damage that should be covered by your homeowners' insurance policy, as well as those that are commonly excluded from most such policies. 

When should damage to your foundation be covered by your homeowners' insurance policy? 

In general, homeowners' insurance policies are meant to cover the cost of damage from sudden, major events or incidents. Wear-and-tear-related damage or problems caused by the gradual settling of your home into the surrounding soil are more likely to be excluded from homeowners' insurance coverage, the same way automotive warranties don't cover "wear" items like brakes and windshield wipers. 

However, when it comes to foundation damage, determining the difference between normal wear and tear (and settling) and a covered accident can sometimes be tricky, especially when this damage doesn't show up until several years (or longer) after the precipitating event. Because foundation damage is often caused by excess water that can eat away at the concrete or stone, pointing to a large storm as the culprit can be a tough sell if the foundation has spent years exposed to surface runoff. 

Because of this, it's worthwhile to seek an insurance estimate on any foundation damage even if you suspect it may not be covered by your policy. You may find yourself surprised to discover the true cause of your foundation issues, and if you do find that your damage is covered, this discovery could save you tens or even hundreds of thousands of dollars.

When may your foundation damage be excluded from coverage?

The best way to answer the question, "is this covered?" is to examine your insurance policy in detail. Some policies may have very specific exclusions that don't require much additional explanation, while others could have broader specifications that may require you to speak to an agent or adjuster to see whether you fall under the coverage umbrella.

However, in general, damage caused by the settling of your house is your responsibility and won't be paid for by your insurance policy. Over time, even the densest soil and stone may shift a bit around your foundation. While this usually happens so gradually that the foundation can adjust itself without cracking, in some cases, surface cracks can develop and damage interior drywall, prevent garage doors from fully opening or closing, or lead to basement leakage.

In addition, damage that would otherwise have been covered but was exacerbated by negligence may be excluded from your policy. For example, if your basement sump pump failed during a large storm and you spent weeks with a water-filled basement before seeking its replacement, it's likely that any water-related damage to your basement will be attributed to your delay in removing the water rather than the storm that overloaded the sump pump.

What options are available to help defray the cost of needed foundation repairs? 

If you've found yourself facing expensive foundation repairs and don't think your insurance policy will pay, there are a few options short of putting this expense on a credit card.

First, you may be able to take out a home equity loan or line of credit. These loans have interest rates similar to those of mortgages, and you may even be able to use any interest paid as a deduction on your federal income tax return. 

You may also want to investigate grants or federally-backed loans in your area, especially if many of your neighbors are facing the same types of foundation issues or if your problems started after a natural disaster hit the area. The Federal Emergency Management Agency and related state agencies can often dole out aid to those who have suffered disaster-related damage that isn't fully covered by insurance.