Buying a house is one of the most exciting, nerve-wracking, and momentous occasions in many people’s lives.
One of the most important things you do when you buy a house is to set up your homeowner’s insurance policy to ensure that you’re protected in the event of a fire, theft, or some other disaster.
Unfortunately, there is a lot of misinformation about home insurance out there, so it’s important to make sure you are able to separate fact from fiction.
Let’s take a look at 18 common home insurance myths and how believing them could cost you.
Myth #1: Home Insurance Isn’t Worth It – It’s a Waste of Money
For many people, their home is the largest single investment they’ll ever make. Why wouldn’t you want to have a financial safety net to protect this investment?
If something were to occur that resulted in your home needing repairs or even to be rebuilt, you’d be glad you had homeowners insurance to help cover the costs.
Basically, it’s worth it to have insurance, but you still hope you never have to call upon it. Protecting yourself in the event of a disaster of some kind is never a waste of money. That being said, you can shop around to try and get the best homeowners policy quote so you can get the best deal possible.
Myth #2: I Should Insurance My Home For Its Market Value
This is one of the most common insurance myths. It’s important that you insure your home for its replacement cost and not its market value. This means that you’re considering all of these costs associated with rebuilding your home all over again.
This includes the costs of building materials and construction costs. If you only insure your home based on its market value, you may come up short in the event you actually have to rebuild your entire house.
Myth #3: All My Belongings Are Covered
Home insurance policies do cover your personal belongings, but it’s important that you take the time to read the fine print. There are often limits to what is covered, and certain types of losses might not be covered. If you have specific valuable collections, you might have to add coverage for these so that they will be fully covered in the event that something happens to them.
Myth #4: Home Insurance Will Replace My Belongings Like New
Again, you’ll want to take a look at your home insurance policy for this one. It’s possible that your belongings are covered for their Actual Cash Value (ACV). This means that they consider the value of your belongings to be the current, depreciated value of the objects, not what they cost when they were brand new.
This means that the amount you receive for your possessions might not be enough to replace them.
Myth #5: Flood Damage Is Covered By Standard Homeowner’s Insurance
This is one of the most crucial home insurance facts to understand. Most home insurance policies do not include flood coverage. If your home is in a region where flooding is common, you’ll want to seek out additional flood insurance to make sure that you’re covered.
Myth #6: My Medical Expenses Are Covered in Case of Injury
When you take a look at your home insurance policy, you might think the medical payment portion refers to covering your own expenses if you were to get injured on your own property. This is, in fact, not the case at all. Instead, this part of the policy intends to protect you in the case that a guest gets hurt on your property.
Myth #7: Making an Inventory List of Your Possessions Is a Waste of Time
Wrong, wrong, wrong. Making an inventory list of your possessions can help prove that you owned them in the first place in the event you need to seek insurance coverage for them.
Once you need to file a claim in order to get reimbursed for your belongings, it might be hard to prove that you ever owned them in the first place. Making an inventory before you need to make a claim can help make the process go smoother and ensure that you receive the reimbursement you deserve.
Myth #8: The Premium Goes Up Every Time a Claim Is Filed
While your premium can go up if you file multiple claims, it is not normally the case that a single claim will raise your premiums.
It is important before filing a claim that you estimate the costs of the repairs. This is because if it is less than your deductible or only slightly more, you will probably want to pay for it yourself instead of filing an insurance claim.
Myth #9: Home Insurance Covers All Valuables, Including Jewelry and Furs
Your homeowner’s insurance policy will have a coverage limit for valuables. Things like furs, jewelry, and special collections should have additional coverage purchased for them so you can be sure they are fully covered.
Myth #10: Home Insurance Covers Damage Caused By a Lack of Maintenance, Including Mold
Poor maintenance is not something that homeowner’s policies cover. It is your responsibility to reasonably maintain your home.
To help you take the best possible care of your home this year, check out this ultimate spring maintenance checklist to keep your property in tip-top shape.
Myth #11: Flood Insurance Is Only for Those Who Live in Flood Zones
Flooding can happen anywhere. If you don’t live in a flood zone, that doesn’t mean that you are in no danger of having flooding danger occur in your home.
Businesses and homes that have government-backed mortgage lenders are required to have flood insurance when they are located in high-risk flood areas. Just because you aren’t required to have flood insurance, however, doesn’t mean that you don’t need it.
It’s important that you realize that 20% of flood insurance claims are made for properties that are not located in high-risk flood zones. That means one out of every five flood insurance claims is someone who, if they believed this myth, wouldn’t have purchased flood insurance!
Whether you’re living in a 25-, 50-, or 100- year flood zone, or you don’t live in a flood zone at all, flood insurance could be a lifesaver. Flooding is also a common occurrence in places where hurricanes are common, so having flood insurance in a hurricane-prone area is a must.
Consider purchasing additional flood insurance, as it isn’t included in most home insurance policies. When you do purchase flood insurance, you’ll want to look into exactly what it will cover and what it won’t.
Myth #12: To Lower Your Insurance Premium, You Have to Lower Coverage
Doing this is a mistake. You should not lower your coverage to save money on your premium. It is essential that you have adequate insurance coverage for your property.
There are different tactics you can use to lower your premium without reducing your coverage. Some policies will lower your premium if you follow certain precautions, such as installing a burglar alarm. Another option is that you could agree to a higher deductible, therefore lowering your premium.
If you’re looking for more tips on how to keep your insurance costs as low as possible, check out this handy article.
Myth #13: The Dwelling Coverage Amount Is Based On the Purchase Price of Your Home
Again, you should not be insuring your home based on how much you bought it for. Instead, you want to insure it based on how much it would cost to replace the entire home from the ground up.
The purchase price of your home includes the worth of the land, which won’t need to be included when you calculate how much insurance you need to rebuild your home. The way that replacement cost is typically determined is by multiplying current local construction costs by the square footage of the home.
Myth #14: You Cannot Buy a Home Without Buying Home Insurance
It is true that most mortgage lenders will require that you have a homeowners insurance policy. That being said, it’s usually up to the homeowner to get adequate and proper insurance. Similarly, if you have a home equity loan, it will likely be required that you’re insured.
That being said, if you purchase a house in cash, no one will require that you have homeowner’s insurance. That doesn’t mean it isn’t still a good idea, though. Being caught without insurance in the event of an unexpected disaster is enough to financially ruin a good portion of the population.
If you aren’t sold on the fact that you probably should have insurance for your home, you might want to learn a bit more about what happens when you don’t have insurance.
Myth #15: Your In-Home Injuries Are Covered
If you or a family member hurts yourself on your property, your homeowner’s insurance will not cover your medical expenses. In such an instance, you would have to call upon your health insurance.
On the other hand, if a guest gets injured on your property, your home insurance will cover your responsibility for their injury.
Myth #16: Insure Your Home At Market Value
If you live in a hot market where prices are rising quickly, and you insure your house by the current market value, you’ll be overpaying for your insurance. If you live in a place with a depressed rental market, you will end up under-covering your home if you base it on the market value of the home.
Myth #17: A Policy Covers All of Your Stuff
In the same way that having home insurance doesn’t cover every type of disaster or occurrence, your home insurance policy won’t necessarily cover all of your possessions. Certain types of your belongings will have to have coverage purchased as an “add-on.” This is why it’s a good idea to make an inventory of all of your possessions and ensure that all of them are covered in the case of theft, fire, or some other disaster.
Myth #18: Older Homes Are Cheaper to Insure
While it might seem like older houses would be cheaper to purchase insurance for, this is not necessarily the case. That’s because older homes can cost more to repair than newer construction homes because of different construction techniques.
Older homes might have things like stained glass, plaster, hardwood floors, and crown molding. Comparatively, a newer construction home will likely have simpler and cheaper construction methods like wood veneer floors and drywall.
Home Insurance Myths: Learning the Truth Will Help Protect You and Your Valuable Assets
Understanding that these home insurance myths are far from the truth is absolutely essential when you’re a homeowner. If you have inadequate coverage or a misunderstanding of what your policy will cover, you could get caught in a very unfortunate position down the line.
Damage or loss to your home can range from stressful to devastating. The last thing you want to deal with at that time is being unprotected in terms of the costs of the damages and the replacement costs of your belongings. Take the time to set up your insurance policy so that it fits with your lifestyle, home, and belongings.
While no one enjoys reading the fine print of insurance policies, it’s important that you understand what is and what isn’t covered by your policy. You should also feel free to reach out to your insurance agent if you have questions about your coverage.
Are you interested in getting insurance coverage tailored to your personal needs? Request a quote today to learn about how LoPriore Insurance can help protect you from life’s surprises.