10 Home Insurance Myths You Shouldn’t Believe
The fine print isn’t always something we’re enthused to read. However, if it’s the difference between saving you thousands of dollars or blindsiding you with catastrophic damages and bills, it’s important to know. Prepare yourself for the worst by debunking the top 10 homeowners insurance myths.
MYTH #1: My home is protected from every natural disaster.
This is definitely not true. While fire and tornado damage is typically covered (except some areas in tornado alley), floods, earthquakes, and hurricanes always require an additional rider. Since floods are one of the most damaging disasters and can result from storms, hurricanes, and earthquakes, it’s smart to buy coverage from the National Flood Insurance Program (NFIP) or another insurer.
MYTH #2: Your hotel will be covered if you can’t stay in your home.
Loss-of-use is a term that will be on your homeowners insurance policy, but will vary depending on your exact plan. Loss-of-use is there to protect you if your home is unlivable after a disaster. While some policies have caps for alternative dwelling coverage, others don’t come with financial assistance at all. Based on your needs and risks, think about whether it’s worth adding this coverage to your plan. It might save you thousands in the case of emergency.
MYTH #3: My belongings will be covered for their full purchase price.
Depreciation is a word you should familiarize yourself with. If you have a TV that you bought three years ago, it’s going to be valued at that depreciated price. There is a way to recoup this money if you have a depreciation refund clause. This will allow you to submit receipts for items lost and receive the difference between the new purchase price and the depreciated value of the old item.
MYTH #4: All of my belongings are covered.
Insurance companies determine your personal property coverage based on the price of your home. Typically, personal property coverage equates to 50-70% of the price of your home. If you have a $200,000 home, you most likely have $100,000 to $140,000 worth of personal property coverage.
If you have expensive jewelry, heirlooms, or art, you’ll need to purchase scheduled personal property coverage. Most plans come with about $1,500 in coverage for theft or damage of these items, but if your special belongings are worth much more than that, purchasing an additional rider can protect you from paying out of pocket if they’re lost.
MYTH #5: Fumigation due to a bug infestation is covered.
Termites are the culprits behind $5 billion worth of property damage every year. However, this damage isn’t covered by standard homeowners insurance policies. Insurance companies see termite damage as something that can be prevented with proper upkeep of your home since it takes months or years to incur catastrophic loss. Since insurance companies are there to protect you from freak incidents that happen suddenly, termite damage doesn’t make the cut.
MYTH #6: It’s okay to inflate your claims.
Inflating your claims is the same as lying. Claims professionals are very familiar with the average cost of all sorts of personal belongings because they work to replace items every day. If you make them suspicious, then you’ll significantly delay getting your claim check since they’ll want to look into every item you report missing or damaged. In short, don’t do it.
MYTH #7: You should insure based on market value.
As we all know from the past few years, the market goes up and comes down. If you base your insurance coverage on a market price, you could overvalue your home and waste money on your insurance coverage or undervalue it and lose money if you need to rebuild. Always appraise based on what it would cost to repair or rebuild your home—because that number won’t ever change.
MYTH #8: Your in-home injuries are covered.
Medical and legal coverage on a homeowners insurance policy is meant for guests—not anyone residing permanently in your home. Your personal liability and medical coverage will protect you if someone is hurt on your property and needs medical attention or sues you.
MYTH #9: Appraisals are final.
An insurance adjuster will appraise your home when you file a claim and come up with a number. However, if you disagree with their estimate, you can negotiate a more realistic settlement. By keeping receipts and record of your belongings, this can be made much easier. There are even handy insurance apps that can help you inventory all of your belongings, purchase prices, and dates of purchase to make this simpler.
MYTH #10: Your premium will go up if you file a claim.
Not all claims will cause negative repercussions for your premium. If this is your first claim, you probably won’t be penalized by higher rates, but if you are, it won’t be by much. For second or third claims, you can expect your insurance premium to rise because your risk assessment will put you in a more serious category.