When homebuyers in Greenwood, IN, and Indianapolis, IN, purchase a house, securing a home insurance policy is a crucial step. But did you know that standard policies don’t cover everything? Many homeowners assume they’re fully protected, only to face unexpected coverage gaps when disaster strikes.
For borrowers and mortgage lenders alike, understanding these common home insurance exclusions can help borrowers make informed decisions and avoid financial surprises.
1️⃣ Flood Insurance – A Must-Have for Many Homeowners in Greenwood & Indianapolis 🌊
The Myth: "If my house floods, my home insurance will cover the damage."
The Reality: Flood insurance is NOT included in standard home insurance policies.
Homeowners in Indianapolis, IN, and surrounding areas like Greenwood, IN, often assume they’re safe because they’re not in high-risk flood zones. But 40% of all flood claims come from low-to-moderate risk areas!
🔹 Buyer's Tip: Even if a home isn’t in a FEMA-designated flood zone, encourage borrowers to consider affordable flood insurance options. A separate flood insurance policy can mean the difference between recovery and financial ruin after a storm.
2️⃣ Earthquakes & Ground Movement – Are Indiana Homes at Risk? 🌍
The Myth: "If my foundation cracks or shifts, my home insurance will cover repairs."
The Reality: Standard home insurance policies typically exclude damage from earthquakes, sinkholes, and ground shifting. While Indiana isn’t known for major earthquakes, the New Madrid Seismic Zone affects parts of the Midwest, and minor tremors do occur.
🔹 Buyer's Tip: Buyers purchasing homes with older foundations should check for past structural repairs and consider additional low-cost home insurance add-ons that provide extended coverage for earth movement.
3️⃣ General Wear & Tear – What Homeowners Need to Know 🏚️
The Myth: "If my roof, plumbing, or HVAC system fails, my insurance will cover it."
The Reality: Home insurance is not a maintenance plan. Policies cover sudden and accidental damage, but if a home’s systems fail due to age or neglect, repairs will come out of pocket.
🔹 Buyer's Tip: If a borrower is purchasing an older home, consider the age of key systems like the roof, plumbing, and electrical wiring. A home warranty can be a great complement to an affordable home insurance policy.
Why This Matters for Mortgage Lenders in Greenwood & Indianapolis
When homeowners aren’t properly insured, unexpected repair costs can put a strain on their finances—and their ability to make mortgage payments. Educating buyers about home insurance exclusions upfront helps prevent closing delays, financial hardship, and foreclosure risks.
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