Homeowners

Debunking 10 major home insurance myths

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As a homeowner — and especially as a new homeowner — taking on a house can feel like suddenly needing a PhD in home repair and maintenance. And of course, you also need to know the ins and outs of your insurance coverage. However, when multiple myths flood the home insurance space, identifying the truth can be hard. So, what are these myths? And more importantly, what's true and what do you need to know about your home insurance policy to make sure you're fully protected? 

Myth #1: Home insurance is super expensive

Home insurance provides financial protection for homeowners in a number of situations, such as if a peril causes damage to the home. As a homeowner, you shouldn't have to break the bank to protect your investment with insurance. However, the cost of home insurance is rising in 2022 even faster than the rate of inflation[1]. By shopping around and knowing what you need, you can find an affordable policy that meets your needs. The most important way you can keep your home insurance within budget is to shop around for the best affordable homeowners insurance rates

Myth #2: As a renter, you are covered by the landlord’s home insurance

As a renter, you may think that your landlord's insurance will cover your belongings. Sorry, but no. It's only for their benefit. Renters insurance is a great way to protect yourself and your belongings from liability exposure and damage due to covered perils.

For example, let's say a water pipe burst at your apartment complex. Your personal belongings are damaged as a result. Without renters insurance, you would be responsible for replacing what you lost. Renters insurance also provides liability coverage which can protect you financially from damages caused by your actions to other people's property. 

Myth #3: Renovations don't impact home insurance

Your home insurance may be affected by any renovation work you do, depending on the size and scope of the project. For example, painting a wall in your home probably won't have any impact on your insurance, but major projects like changing the roof or adding a swimming pool will affect your coverage. Be sure to check with your insurance provider before beginning any big home improvement projects, so you know what's covered. You may need to increase your coverage or could even be eligible for discounts.

Myth #4: Home insurance covers all my belongings

Many people are unaware that their home insurance policy may not cover all of their personal belongings. There are typically limits to what is covered, and some types of losses may not be included at all. It's important to discuss coverage for valuable items with your insurance provider to make sure they will be protected in the event of damage or loss. If you have a number of valuables like jewelry, firearms, expensive coins, etc. that exceed your coverage limits, you may want to look into additional personal property insurance.

Myth #5: Home insurance covers all natural disasters

Everyone who's ever lived in a flood plain is filing this one under: wouldn't that be nice. 

Home insurance policies typically do not cover all natural disasters automatically. Instead, you usually need to purchase separate coverage for particular anticipated disasters. For example, people who live in earthquake-prone areas may need to add additional coverage for that specific peril.

Similarly, those who experience flooding in their region may find that home insurance coverage depends on the cause of the flooding. Standard home insurance policies usually do not cover overland flooding (i.e., water swelling from nearby lakes and rivers). In such cases, you would need to seek out specific coverage for that type of event.

Myth #6: Home insurance covers pests and mold infestations

Most people are unaware that home insurance policies generally do not cover damage caused by pests, rats, raccoons and mold infestations. In many cases, insurance only covers them if a covered peril caused the initial damage. So if you live in a wet climate and mold forms, it wouldn't be covered by many policies. However, if a pipe burst and the mold formation was a direct result of that, you might be covered. A mold endorsement can sometimes be added to your policy for an additional cost. It is important to review your policy and speak with your insurance broker to confirm coverage before assuming your damages will be covered.

Myth #7: Home insurance offers coverage for home maintenance

Your homeowner's insurance policy doesn't cover the costs of general upkeep and maintenance around your house. You can however purchase a separate home warranty that can cover the replacement of certain appliances and structures in your home that need replacement from regular wear and tear. Otherwise, any expenses related to these activities will come directly out of your pocket. For example, let's say your windows are old and need to be replaced. The cost of this replacement would be your responsibility.

Myth #8: Home insurance rates are standardized

There is no one-size-fits-all when it comes to homeowners insurance rates. They can differ significantly from one provider to the next and depending on where you live. One source found that in some Midwestern states, insurance is seven times more expensive than in other states[2]. The proximity to natural disasters affects rates. Also, different states have their own regulations regarding home insurance, which will affect your rates. Regardless, it's important to compare your options when shopping for insurance, in order to make sure you're getting the coverage you need at a price that's right for you. Comparison sites can be a big help in this process, providing honest recommendations and comparing multiple options to help you find the best policy rate.

Myth #9: Home businesses are automatically covered by home insurance

Unless you've purchased special home business insurance, your home-based business is not likely to be covered under the terms of standard home insurance policies. To get coverage for your home business, it's best to speak with your insurance provider about your options. You may be able to add an endorsement to your current policy, or you may need to purchase separate insurance specifically for your home-based business. This will ensure that both your home and business are protected in the event of an accident or other issue.

Myth #10: Older homes are cheaper to insure

There is a common misconception that older homes are cheaper to insure. Perhaps it stems from car insurance, where used vehicles are in fact a little cheaper on average to insure. When it comes to home insurance, however, older homes can be quite expensive to repair due to the use of different construction materials. Wooden flooring, tube wiring, older plumbing and plaster or calcimine walls can all be very costly to fix.

Learn your policy

In order to protect yourself from any potential misunderstandings that could lead to insufficient coverage, it is crucial to be thorough. Carefully read over the fine print of your insurance policy and make sure you understand every clause. Discuss any areas of concern with your insurance agent and make sure you are getting the coverage you need. In the event of an accident or other mishap, being unprepared despite having insurance is the last thing you want.

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