What does State Farm homeowners insurance not cover?

Editorial team Published on

Standard State Farm homeowners insurance does not cover natural disasters like floods and earthquakes, routine wear and tear, or business activities.

Major Exclusions

  • Floods and Surface Water: Damage from overflowing bodies of water, heavy rain accumulation, tsunamis, or tidal surges is excluded. (State Farm does not issue direct flood insurance, but can help secure a government-backed National Flood Insurance Program policy).
  • Earth Movement: Earthquakes, landslides, mudslides, and sinkholes are not covered unless an earth movement endorsement is added.
  • Wear, Tear, and Maintenance: Gradual deterioration, rust, rot, and mechanical breakdown of old appliances are excluded.
  • Pests and Infestations: Damage caused by rodents, insects, birds, or domestic pets is not covered.
  • Business Pursuits: Liabilities or property losses related to running a commercial business from your home are generally excluded.
  • Vehicle Usage: Damage or liability involving motorized vehicles (like cars or motorcycles) driven on public roads falls under auto insurance, not home insurance.
  • Intentional or Nuclear Acts: Losses caused by deliberate, malicious destruction or nuclear hazards are excluded.

Optional Endorsements

You can buy add-ons to cover some common gaps:

  • Water Backup: Protects against water backing up through sewers, drains, or sump pumps.
  • Service Line: Covers damage to underground utility pipes and wires.
  • Equipment Breakdown: Provides protection for major home systems and appliances through State Farm Home Systems Protection.

Is State Farm good at paying homeowners claims?

State Farm has high financial strength to pay claims, but customer experiences and regulatory reviews regarding its actual claims handling and payout practices are mixed.

Financial Strength vs. Customer Satisfaction

  • Financial Stability: State Farm holds high financial ratings, including an A++ (Superior) from AM Best, meaning the company has massive financial reserves and the baseline capacity to pay out valid claims.
  • Industry Scores: In national studies like J.D. Power's property claims satisfaction surveys, State Farm generally scores above average or around 831 to 891 out of 1,000, performing better than many standard competitors though slightly behind top-tier specialty insurers like USAA.
  • Consumer Complaints: Data from the National Association of Insurance Commissioners (NAIC) indicates that State Farm receives a slightly higher volume of consumer complaints than expected for its market size.

Common Customer Complaints

While many policyholders report smooth claim resolutions, negative reviews and public disputes frequently center on:

  • Delays and Communication: Policyholders often report slow inspector dispatch times, shifting adjusters, and poor communication during large-scale disasters.
  • Underpayment and Denials: Critics and regulatory investigations point to instances of low repair estimates or high denial rates following major weather events and wildfires.
  • Regulatory Scrutiny: State Farm has faced significant regulatory pushback and lawsuits from state officials (such as in California) over allegations of delaying, underpaying, or adding excessive red tape to wildfire and disaster claims.

You can review specific property guidelines or file a claim directly through State Farm Home and Property Claims.

What are three things that are not covered by homeowners insurance?

Standard homeowners insurance policies typically do not cover Floods, earthquakes, and general wear and tear.

Common Exclusions

  • Floods: Water rising from the outside (like heavy rain or overflowing rivers) requires a separate flood policy.
  • Earthquakes: Ground shaking and cracks from earthquakes require a separate policy or endorsement.
  • Wear and Tear: Gradual damage, aging roofs, and regular maintenance issues are the responsibility of the homeowner.

What are the top 5 worst homeowners insurance companies?

Based on recent industry surveys like J.D. Power's property and satisfaction studies, the lowest-ranking homeowners insurance companies for customer satisfaction and claims include Universal Direct, Tower Hill Insurance, National General, Homesite, and Foremost.

Lowest-Ranking Home Insurers

  • Universal Direct: Ranks at the very bottom of major customer satisfaction and claims surveys due to slow response times and service issues.
  • Tower Hill Insurance: Frequently scores near the bottom for overall customer experience and policyholder satisfaction.
  • National General: Scores poorly on consumer satisfaction metrics regarding communication and payout handling.
  • Homesite: Routinely lands at the bottom of J.D. Power claims satisfaction rankings for property coverage.
  • Foremost: Receives below-average customer satisfaction scores for handling claims and policy value.

Is State Farm cancelling homeowners insurance?

State Farm is not canceling all homeowners insurance, but the company has stopped writing new home policies and non-renewed tens of thousands of existing policies in high-risk areas like California.

Why State Farm is Reducing Coverage

  • Catastrophe Exposure: Rising risks from severe wildfires and natural disasters have driven up claims.
  • Inflation and Costs: Historic increases in construction costs have outpaced standard inflation.
  • Reinsurance Market: Reinsurance (insurance that companies buy to protect themselves from massive losses) has become very expensive and difficult to secure.

State-Specific Actions

  • California: State Farm stopped accepting new personal and business property applications and moved forward with non-renewing 72,000 property and apartment policies. While regulatory pressure and subsequent agreements have temporarily halted or altered some broad non-renewal plans, finding traditional coverage in wildfire-prone regions remains difficult.
  • Other States: While widespread non-renewals are concentrated in high-risk catastrophe zones, most users on Facebook agree that individual policy cancellations or non-renewals can happen nationwide based on specific property risk, claim history, or regional underwriting guidelines.

State Farm’s Shocking New Policy: Why It’s the Worst for Homeowners!

9 related questions found

What are common issues with State Farm homeowner claims?

Common issues with State Farm homeowner claims include delays, underpaid or low-ball settlements, and disputed damage classifications.

Frequent Problems

  • Endless Delays: Policyholders often report long wait times for investigations and responses, sometimes stretching for months without a clear update.
  • "Adjuster Roulette": Homeowners frequently complain about being reassigned multiple adjusters during a single claim, forcing them to repeatedly re-explain details and restart the process.
  • Low-Ball Offers: Initial settlement offers are often valued far below the actual cost to repair or rebuild, leaving owners to cover the difference.
  • Disputed Storm and Roof Damage: State Farm faces major legal scrutiny and lawsuits for allegedly misclassifying storm, wind, and Law.com hail damage as pre-existing "wear and tear" to avoid full payouts.
  • Water Damage Denials: Disagreements often arise over whether water destruction came from a sudden burst pipe (covered) or a slow, long-term leak (excluded) [0.6.12, Reddit].

How to Protect Your Claim

  • Document Everything: Take clear photos and videos of all damage, and keep every receipt for temporary repairs.
  • Get Independent Estimates: Hire your own contractor or public adjuster to write an independent repair estimate rather than relying solely on the insurance adjuster's numbers.
  • Demand Written Explanations: Ask for a formal, written justification for any denial or reduced payment.
  • File a State Complaint: If the company acts in bad faith or drags out the process, file a formal complaint with your state’s department of insurance.

Which homeowners insurance company denies the most claims?

Mid-Century Insurance Company of Texas (a Farmers subsidiary) closed the highest percentage of homeowners claims without payment at 78%, according to a recent Weiss Ratings study.

Other major home insurance companies with high rates of claims closed with no payment include:

  • Lemonade Insurance: 64% closed without payment
  • Spinnaker Insurance: 61% closed without payment
  • Citizens Property Insurance: 61% closed without payment
  • Farmers Insurance Exchange: 56% closed without payment
  • Allstate and USAA: Both averaged close to or above 47%-51% in recent industry analyses.

Why Claims Are Closed Without Payment

A high "no payment" rate does not automatically mean an insurer is acting in bad faith. Many claims are closed with zero payout because:

  • The damage falls below the policy's deductible.
  • The specific type of damage (like flood or earthquake) is excluded from standard policies.
  • There is a lack of documentation or proof of loss.
  • The damage is deemed normal wear and tear rather than a sudden, insurable event.

You can check detailed closure rates for major carriers in the complete Insurance.com analysis.

What homeowners insurance to avoid?

Avoid policies and coverage traps that leave you unprotected or financially exposed when buying homeowners insurance.

Policies and Plan Types to Avoid

  • Actual Cash Value (ACV) Policies: Avoid policies that pay out based on ACV instead of replacement cost. ACV subtracts depreciation for age and wear, meaning you will receive far less than what it actually costs to rebuild your home or replace items today.
  • The Cheapest Policy Available: Do not automatically pick the lowest-cost premium. Rock-bottom prices usually hide high deductibles, low coverage caps, and severe structural exclusions.
  • Poorly Rated Insurers: Research financial stability and customer satisfaction. Companies with low A.M. Best ratings, excessive NAIC complaint ratios, or a reputation for slow claims processing (such as certain low-tier or high-complaint regional providers) can make post-disaster recovery painful.

Coverage Gaps and Exclusions to Watch For

  • Standard Flood and Earthquake Exclusions: Standard policies never cover rising natural floodwaters or ground movement. If you skip separate flood or earthquake endorsements, you carry 100% of the risk.
  • Sewer and Drain Backups: Water backup from overloaded municipal sewers or failing sump pumps is excluded by default. Always add an endorsement if your basement contains finished living space.
  • Unscheduled High-Value Valuables: Standard limits for jewelry, fine art, firearms, and collectibles are very low. Avoid leaving these items unlisted; purchase a scheduled personal property rider.

Common Mistakes During the Buying Process

  • Insuring for Market Value vs. Rebuilding Costs: Never base your policy limit on your mortgage balance or original purchase price. Insure your home for current local construction and labor replacement costs.
  • Neglecting a Home Inventory: Failing to document your belongings with photos or videos before a loss makes the claims process slow and difficult.
  • Failing to Disclose High-Risk Features: Forgetting to mention trampolines, aggressive dog breeds, or unpermitted renovations can lead an insurer to deny a claim or cancel your policy entirely.

What lowers your homeowners insurance?

You can lower your homeowners insurance by bundling policies, raising your deductible, and upgrading your home safety features.

Policy Adjustments

  • Bundle policies: Buy your home and auto insurance from the Liberty Mutual or another same company to save up to 30%.
  • Raise your deductible: Move your deductible from $500 to $1,000 or $2,500 to cut your yearly premium. Make sure you have enough cash saved to pay that higher amount if you need to file a claim.
  • Shop around: Compare quotes from multiple insurers every few years instead of auto-renewing.
  • Review coverage: Remove extra coverages for items you no longer own or value at high amounts.

Home Improvements and Safety

  • Upgrade your roof: Install damage-resistant materials or replace an old roof to avoid surcharges.
  • Improve security: Install smoke alarms, burglar alarms, deadbolt locks, or monitored security systems.
  • Add smart tech: Install smart water leak detectors or automatic shut-off valves to prevent costly water damage.
  • Remove hazards: Take out high-risk items like trampolines, old treehouses, or in-ground pools that raise liability.

Financial and Personal Habits

  • Improve your credit score: Pay down debts and keep your credit score high, as insurers use it to set rates.
  • Avoid small claims: Pay for minor repairs out of pocket rather than filing small claims that raise your risk tier.

What is the most common damage to your home that insurance does not cover?

The most common and costly type of home damage that standard insurance does not cover is flood damage from rising natural waters.

Common Uncovered Damage Types

  • Floods: Rising water from heavy rain, overflowing rivers, or storm surges requires a separate flood insurance policy.
  • Earthquakes and ground movement: Earth tremors, sinkholes, and landslides are excluded and need special earthquake insurance endorsements.
  • Wear and tear: Gradual roof decay, aging pipes, and rotting wood are normal maintenance issues, not sudden accidents.
  • Pests and infestations: Damage from termites, mice, or other vermin is considered preventable home upkeep.
  • Sewer backups: Water or sewage backing up from outside drains is typically excluded unless you buy a specific water backup endorsement.