Homeowners Insurance Myths: Separating Fact from Fiction
With all the information accessible online, it is easy to get confused or be exposed to misinformation. Separating fact from fiction is important for a homeowner to ensure you have a policy with adequate coverage.
Myth: My insurance premiums will go up if I file a claim.
Fact: Many people avoid filing claims out of fear it will dramatically increase their premiums. The reality is, one single claim does not always increase your premium. Your insurance company may even offer accident forgiveness. However, if you file multiple claims within a certain time period, this can cause your insurance premiums to go up. If the cost of repairing or replacing something is less than the cost of your deductible, you should consider paying out of pocket instead of filing a claim. If the damages are extensive, however, do not be afraid of filing a claim. After all, that's what insurance is for. Talk to your agent about your claim and whether or not it will raise your premiums based on your history, and if so, by how much.
Myth: My homeowners insurance covers the cost of all of my belongings.
Fact: It can be a rude awakening to discover you have lost something incredibly valuable and won't be receiving enough to cover the cost of that item. Just like your homeowners policy may not cover things like floods or earthquakes, it's not going to automatically cover all of your personal property. Most policies have coverage limits for certain possessions. For example, your insurance company may have a limit of up to $2,000 for jewelry, so don't expect them to cover a missing Rolex worth $8,000 - $12,000. You may even find that the replacement cost of your items is determined by their actual cash value, meaning you could be getting the depreciated value instead of what you paid for the item. Don't assume all of your belongings can be replaced in the case everything is destroyed or stolen. Keep an inventory of items and how much they are worth, then talk to your agent about supplemental coverage or policy endorsements.
Myth: Flood insurance is only necessary if I live in a flood zone.
Fact: According to the National Insurance Program, nearly 20% of claims for flood damage come from homes and properties that are not in high risk flood zone areas. If your risk is low, but the risk is still there, you should consider getting a policy to cover you in case of a flood. Many neighborhoods that were not considered high risk for floods were devastated during Hurricane Harvey in Houston, Texas in 2017. If you live nowhere near a body of water or river, and there's little to no risk of flooding, you may not need this insurance, but as flooding is one of the most common types of natural disasters in the United States, it is something you should consider nonetheless. The last thing you want is to lose your home to a flood only to realize you did not purchase flood insurance because you were not situated in a high risk flood zone.
Myth: If my home is a total loss, insurance will cover the market value.
Fact: Your homeowners insurance covers the cost to rebuild your home, not the total market value. If your home was worth $585,000 on the market, but only costs $350,000 to rebuild, it can be a major shock when you talk to your insurance company to realize that's all they will cover. Find out how much it costs to rebuild your home and ask your insurance agent what the company will pay you if your home is destroyed by a disaster, such as a hurricane, fire, or tornado.
Myth: Damage caused by pests is covered.
Fact: If your home's structural damage is caused by termites, don't expect your insurance company to cover it. Most policies have exclusions for damage caused by pests, since it is your responsibility as a homeowner to ensure you do your part in avoiding these issues. Keeping pests out of your home is considered a responsibility of the homeowner, so you need to be on the lookout for outbreaks. Check neighborhood websites, such as www.Nextdoor.com for homes in your area experiencing problems from things like termite infestations. Find local pest control services that work to eliminate pests from entering the home and causing damage. Check regularly for signs of pests in your home.
Myth: If I'm injured in my own home, my homeowners insurance will cover the costs.
Fact: While your homeowners insurance policy may cover guests or visitors that are injured in your home, your insurance policy is not going to cover you if you get hurt. This extends to the other inhabitants in your home as well. If your kids are playing in their bunk bed and fall, resulting in a broken wrist or two, you will need to look to your own family health insurance coverage rather than your homeowners insurance coverage. If your neighbor's kid falls and breaks a wrist, that's a different story.
The bottom line is, you shouldn't assume anything. Read your policy in depth, formulate questions, and talk to your insurance agent. Make sure you have adequate coverage for your home and belongings, and are going to receive enough money to replace them should you need to. In the event of an emergency, the last thing you want to hear is you assumed something that isn't true. Speak about these common myths to your insurance agent so you can better prepare yourself for what to expect.