Many homeowners are far less insured than they think they are. Certain home insurance myths have become so pervasive that many of us labor under this misunderstanding until it’s too late. There are a lot of misconceptions that can leave you paying surprise costs out-of-pocket if something happens.
You can avoid falling into most of these traps by looking closely at your homeowner’s insurance policy and upgrading or adjusting coverage as needed. Have you based your assumptions on any of these insurance myths? Consider taking another look at your policy.
#1 Your Valuables Are All Covered
Contents insurance does not necessarily cover all of your possessions, especially when it comes to valuables like artwork, motorized pleasure vehicles, or jewelry. Your standard home insurance policy will cover personal possessions up to a limit.
If you keep jewelry, fine art, or valuables in a safe, you can easily exceed those limits. You may need to have them appraised and insured separately. Moreover, if you keep motorized pleasure vehicles in your garage or on your property, they may be limited or even exempt from basic coverage, and specialty coverage should be purchased to cover their replacement if they are damaged or lost.
There are other reasons your belongings may not be completely covered. You should get help with content insurance claims so that you fully understand your policy, the claims process, and how to make sure you receive the coverage you’re entitled to.
#2 Your Insurance Is Based on Your Home’s Market Value
Your dwelling coverage (costs for repairing or rebuilding your home in the case of a loss) is not the same as the market value of your home. It’s based on the replacement value of the actual structure of your home, i.e., labor and material costs. The difference could be considerable depending on the kind of real estate market you live in.
A home in a major, real estate-competitive city could have a much higher market value than its actual replacement cost. It’s a warning not to reduce your insurance coverage just because the market value of your home decreases.
#3 Home Insurance Protects You Against Flooding
This may come as a surprise, but home insurance policies in many regions do not automatically come with flooding insurance. Insurers do not like to include flood insurance because not enough homeowners sign up to make it profitable since the value of losses from overland flooding tends to be very expensive.
In this case, we use the term “flooding” to mean overland flooding, which is when the water flows from an outside body of water and crosses dry land. Keep in mind that internal flooding from sewage backups may not be included in your insurance policy either.
#4 Your Coverage Is the Same when You’re on Vacation
If you’re on vacation and your home is unoccupied, the same rules may not apply to your coverage. You’re at a higher risk for theft and water damage from frozen pipes if you leave your home unoccupied. This will obviously depend on the length of time you leave the home unoccupied and whether you have steps in place to detect losses while you’re away. Contact your insurance company and find what steps you need to take to keep your full coverage valid during a vacation.
#5 Home Insurance Covers Damage Caused by Infestations
Infestations from insects, rodents, or any pest are almost always excluded from insurance policies. Ants, squirrels, mice, rats, raccoons, termites, and other damaging infestations are usually not covered.
If you believe any of these insurance myths when you first purchased insurance coverage, it’s probably time to re-evaluate your insurance policy and remedy any holes you’ve left open.