New limits and exclusions

For many Americans, shopping for homeowners insurance is like a parlor game. Roughly 2 million homeowners, particularly along the Gulf and Atlantic coasts, are stuck paying higher premiums for less-comprehensive coverage with state-run, last-resort insurance pools.

The slow, steady erosion of coverage is another potentially ruinous trend. Changes in deductibles and reduced coverage often are announced—and ignored—in policy-renewal letters. Unless you're vigilant, you might have missed these:

Windstorm or hurricane deductible

In coastal states, many insurers now require a separate, higher deductible for damage caused by a hurricane or severe windstorm, tornado, or hailstorm. It can be as much as 5 percent of the insured value of the home (10 percent in Florida). For $200,000 of coverage, that's $10,000 that you'd have to pay before insurance kicks in.

Anticoncurrent causation clause

Insurers have successfully used this legalese to eliminate coverage for an insured peril when another, uninsured peril occurs at around the same time. After Hurricane Katrina in 2005, Hunter notes, insurers denied claims for covered wind damage on homes that also had noncovered flood damage, even if the flood occurred hours after the storm hit. Hunter notes the clause can be invoked at other times—for example, when an earthquake (not covered) and a fire (covered) happen at around the same time.

Limits on mold

Most carriers have dropped coverage for mold, except when it is caused by another covered peril.

Reduced dog-bite coverage

Some insurers are excluding breeds such as pit bulls and Rottweilers from coverage or boosting premiums for their owners. Dog bites make up one-third of homeowners liability claims, says the industry-sponsored Insurance Information Institute.

No guaranteed replacement

This change has been around for a while, but it's still misunderstood. A few carriers, notably the highly rated Chubb Group, still offer the equivalent of guaranteed replacement cost, which promises to fully restore a damaged home, no matter what the cost. But most other insurers limit their offerings to replacement cost coverage, which pays only up to the stated value of the home, or extended replacement cost, which provides additional coverage, usually 20 percent over the home's stated value. So if your coverage is insufficient, you're on the hook for the rest.

Hunter refers to those changes as a "hollowing out of the homeowners policy." Though coverage has been cut, consumers haven't seen a commensurate drop in premiums because overall rates have risen. In Louisiana, for instance, Farmers Insurance Exchange received approval this year to mandate a statewide hurricane deductible of 3 percent of a home's insured value and a 15.5 percent average premium increase to boot.

Our advice

Read your policy and any other correspondence. Ask your agent to explain anything you don't understand.