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Does home insurance cover foundation damage?

Does home insurance cover foundation damage?

Cracks, leaks, a shift in the soil, and other types of damage to your home’s foundation are not only harmful to the structure but also expensive to repair.

If you have home insurance and your policy covers the event that caused the foundation damage, it may be covered. This may help you to avoid paying the substantial cost of repairing it. For example, if your policy covers floods, you’ll be covered if a flood damages the foundation.

However, in Australia, when it comes to home and contents insurance policies, the terms of disaster coverage can be quite broad. This can result in underinsurance, where you need to pay a huge proportion of the cost of repairs out of pocket, despite having home insurance.

Understanding when your house foundation repair will be covered by homeowners insurance could be the difference between a successful claim and having to dip into your savings in an emergency.

When can you use your home insurance for your home’s foundation?

The events your insurer chooses to cover in your home insurance policy are often included to protect you from sudden or unplanned situations like vandalism or acts of nature. For example, some commonly included events are:

  • Vandalism
  • Fire
  • Large objects like trees falling
  • Storms

Simultaneously, you might have to pay an additional premium to get cover in events like floods and earthquakes.

To get an understanding of which events your policy covers, it’s a good practice to thoroughly read your product disclosure statement (PDS). Your PDS will list all the events that are covered along with the details of any limitations that apply.

Is soil shift caused by floods covered by home insurance?

While floods can be covered in your home insurance policy, soil shifts aren’t. If the soil shifted due to a flood, however, you can raise a claim. Whether this sort of claim is possible depends on whether the flood is a direct or indirect cause of the shifting soil.

If you can demonstrate that a flood directly caused a landslide or erosion event and your policy provides flood cover, you’re eligible to claim. However, if the flood caused a subtle change to the soil’s consistency, which then shifted later. Under these circumstances, your claim will likely be rejected even if your policy covers floods.

The details of whether you’re covered or not can be confusing, especially because each insurer defines things differently. So it’s always a good idea to read the PDS carefully before choosing an insurer. You could also consider contacting your insurer directly to understand the exact details of your cover.

When does your home insurance not cover your home’s foundation?

What is specifically covered differs from one insurer to another. Most policies, however, don’t cover events that were either avoidable or preventable like:

  • Pre-existing damage
  • Faulty construction
  • Periodical wear and tear
  • Shifting soil
  • Damage caused by tree roots
  • Damage caused by termites
  • Damage caused due to negligence or illegal activities

Insurers often believe you should’ve noticed them or you could’ve prevented them from escalating during the early stages. Due to this belief that any damage caused by these events could’ve been prevented, insurers are unlikely to include them in your policy cover.

What to do if the damage to your foundation isn't covered

In most cases, if the damage to your house’s foundation is caused by a source that is not covered by your insurance, you will need to pay for the repairs yourself.

However, before you give up, you could consider hiring a foundation specialist for a second opinion if your claim is denied. For example, if your insurer claims that flooding was an indirect cause of your house’s foundation damage, consult a foundation specialist to confirm it was the direct cause.

It’s also beneficial to consider the location of your house and events that are known to frequently occur when choosing your insurance policy. For example, if bushfires are a common occurrence in your area, consider opting for a policy that covers them. So, before selecting a home insurance policy that covers foundation repair, you could browse through different options to choose one that matches your requirements.

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This article was reviewed by Personal Finance Editor Jodie Humphries before it was published as part of RateCity's Fact Check process.

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