More on Home Insurance
More on Home Insurance
There are a lot of myths surrounding homeowners insurance, like that it’s not worth the cost or that it’s unaffordable. Here’s why those misconceptions are wrong.
Published December 31, 2020
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There are a lot of misconceptions around homeowners insurance, like what it actually does and does not cover, how it covers certain property damage, and whether or not you legally need it.
Despite what you may have heard, homeowners insurance is essential financial protection for you, your home, and your personal property in the event the unexpected happens, and it is actually affordable for most homeowners. Here are nine common myths about homeowners insurance — and why they are wrong.
This is a popular one — in fact, homeowners insurance is not required by law in any of the 50 states. However, your mortgage lender will likely require you to purchase a certain amount of homeowners insurance coverage. Lenders do this because they know how expensive it is to rebuild a home and that most people wouldn’t be able to afford to pay to back those costs out of pocket. By requiring you to have homeowners insurance, lenders are protecting their investment in your home.
Homeowners insurance costs around $1,200 a year on average, according to the NAIC. Insurance companies also offer various discounts to make your premiums more affordable. For example, many insurers offer safety discounts, so if you install burglar alarms in your home you may get some money off your premiums. Insurers may also offer home improvement discounts, like if you replace your old roof or install newer, storm-proof windows, or discounts for going a certain amount of time without filing any claims.
Homeowners insurance can wind up saving you hundreds of thousands of dollars if disaster strikes. For example, if a windstorm knocks a tree over and demolishes half your house, your homeowners insurance can pay to rebuild your home, help pay to replace your personal belongings that were destroyed, and pay for you to live elsewhere, like in a hotel or a rental unit, while your home is being repaired.
In addition, homeowners insurance also protects your liability. So if a guest gets hurt on your property and decides to sue you, your homeowners insurance can help cover legal costs. Or if your dog gets loose and bites your neighbor, your homeowners policy can help pay for their medical bills.
Although all these scenarios are hypothetical, they are real dangers. Owning a home comes with a lot of unknown, costly risks, and homeowners insurance is a way to protect yourself so you won’t be on the hook for expensive bills.
Even if you are a skilled builder, contractor, or handyperson, that doesn’t mean you’ll be able to afford to pay out of pocket for every repair your home may need. True, sometimes it makes more sense to make the repairs yourself instead of filing a claim and paying your deductible, but not always.
For example, you likely don’t want to pay out of pocket to replace your roof after a tornado, and you definitely don’t want to be stuck buying brand new TVs, furniture, and clothing after a burglary.
Many people assume once you have a homeowners insurance policy in place, you should just keep the same policy indefinitely, especially if you don’t file any claims. Though this might work for some, it’s actually a good idea to reshop your homeowners insurance every one-to-two years. Shopping around can save you money if you find the same coverage at a better rate, or you may discover that your current insurance company is still the best deal out there.
Homeowners insurance does not cover flood damage. If a flood damages your home, you would not be able to file a claim with your homeowners insurance company for the damage.
In order to protect your home and personal property from flood damage, you’d need to purchase a standalone flood insurance policy. Many home insurance companies offer flood insurance policies through FEMA’s National Flood Insurance Program (NFIP). There is also private flood insurance, although it’s less common.
Homeowners insurance does protect your personal belongings if they’re stolen, whether the theft was on or off your property. If your laptop gets stolen at the airport, for example, your insurance could help pay to replace it even though the burglary didn’t take place inside your home.
However, homeowners insurance has special sublimits on how much you can be paid out for certain categories of valuable items, like jewelry, art collections, or expensive technology. For example, if your coverage limit for jewelry is $2,000 and your $5,000 necklace is stolen, your homeowners insurance would only reimburse you $2,000 maximum.
If you want extra coverage for your valuable items, you can add endorsements to your policy to make sure all your belongings are properly protected.
This is false. The amount of homeowners insurance coverage you need (your dwelling coverage limit) should be based on the rebuild cost of your home, meaning the amount of money it would cost to fully rebuild your home in the event it is completely destroyed. How much you bought your house for, or how much it’s current market value is, does not affect how much homeowners insurance you need.
Homeowners insurance doesn’t cover termite damage or any type of pest infestations, including bats, mice and rats. Home insurance is designed to protect you from sudden and accidental damage, and pest infestations happen over time, so insurance companies consider them preventable.
In fact, homeowners insurance excludes coverage for any maintenance issues and regular wear and tear because insurance companies expect homeowners to be responsible for the proper upkeep of their property.
Kara McGinley is an insurance editor at Policygenius, specializing in home, auto and renters insurance. She previously worked as a freelance writer and copywriter, and has been writing about insurance since 2019. Kara is an expert at making complicated topics like property insurance simple to understand. Her work can be found in Teen Vogue, The Culture Crush, and more.
Kara has a B.A. in English from East Carolina University.
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