Homeowners Insurance Myths

Myth #1 - Standard homeowners insurance covers flood damage. 

Flood damage to your home and personal property is NOT covered by standard homeowners insurance policies. The only time your homeowners insurance policy may cover flood damage is if the flood occurred accidentally at the hands of the owner or a guest of the house. For example, if your bathtub accidentally overflows, your sustained damages will be covered by your policy. However, if your basement floods due to torrential downpours then your homeowners insurance policy does not cover any of the resulting damages. 

Most insurance companies can offer you a separate flood insurance policy which is underwritten by the National Flood Insurance Program (NFIP) and can be purchased by homeowners, renters, and condo owners.

Flood Insurance typically covers the cost to replace your home, however it only covers the actual cash value for coverage of your possessions. Actual cash value refers to the value of the possessions to replace them minus the depreciation value.

Myth #2 - If I file a home insurance claim, my home insurance premium will definitely go up.

While many home insurance companies do look at your claims history, there are many other factors that determine how much you will pay for homeowners insurance such as the history of natural disasters in the geographic area where you live or if your home is in an area with increasing crime.

Filing one claim over a period of a few years might not increase your homeowners insurance premium. To be on the safe side, always think twice before filing a claim for minor damages to your home. Consider your deductible. If the total cost of repair is not too much more than your deductible you might want to consider paying for the repairs yourself. While this might cost you more upfront, it might save you from an increased premium. If, because of a stroke of bad luck, you have to file multiple claims over a period of a few years and your premium is steadily increasing, rest assured there are other ways to save on your home insurance. Ask your home insurance agent about home insurance discounts. Sometimes simply installing a smoke or burglar alarm system; or by insuring your auto policy with the same company as your home policy, you can save a great deal of cash.

Myth #3 - All of my valuables such as jewelry will be covered in the event of a burglary.

The protection provided for personal property under the typical homeowners, condo or renters policy is very broad, and includes coverage for your furniture, clothing, and appliances. It only provides limited coverage for valuable items such as jewelry, silverware, furs, and art.  Most insurance companies put a cap of $1,500 on total jewelry lost during a burglary of your home.

Scheduling items allows you to purchase better protection for your special property than would be available under the typical homeowners policy. In addition to being able to purchase higher limits of coverage, more perils are covered.  If you have jewelry or other valuables worth more than $1,500 you should talk to your home insurance agent and schedule an endorsement on your policy giving you additional coverage.

Myth #4 - My homeowners insurance covers mold and/or other issues related to lack of maintenance.

Homeowners insurance protects you from damage caused by covered perils such as wind, hail, lightening, fire and theft.  Insurance companies typically consider mold damage a home maintenance problem—and consequently, it is excluded from standard home insurance policies unless you can attribute the mold damage to a covered peril.  In such cases, some policies provide $10,000 or more for mold damage.  Mold caused by water from humidity, leaks, condensation or flooding is excluded from coverage.  Keeping your home well maintained and safe for others is your responsibility and your home insurance company will decline coverage for maintenance related claims.

Myth #5 - When determining my coverage, I should use the purchase price for my house as my dwelling coverage amount.

A common mistake when homeowners are getting quotes for their home insurance is that they use the purchase price of their home to determine their dwelling coverage. Yet, the purchase price of your home includes the land under your home which does not need to be replaced in the event of a fire or other peril to your home. Your dwelling coverage should always reflect the replacement cost of your home or how much it would cost to rebuild your home in the event of a total loss. You should also make sure that you have enough coverage to replace your belongings.

To determine the cost of rebuilding your home, multiple the square footage of your home by local construction costs. You can use a replacement cost calculator to help you determine the amount if necessary.  The replacement cost of your home may change over time as construction costs increase so be sure to account for that in annual reviews of your homeowners policy.

If you have questions about any of these homeowners insurance myths, call us today at 800-922-8381 to get the facts straight!