You never know when a disaster will strike and damage your home – be it Storm damage, Fire damage, or a break-in. One way to secure yourself financially in an emergency or in the event of unexpected events is household contents insurance. However, there are many myths about home insurance that can lead homeowners to a costly coverage gap discovery.
Common misconceptions about home insurance include what it covers and what it doesn't, what type of plan is best, and whether you need coverage by law. Here we debunk 7 of the most common myths about home insurance.
Myth # 1 of home insurance: Mold, flooding and termite damage are covered
A common misconception about home insurance is what is and what is not included in the insurance policy. Home contents insurance reimburses you if your house or personal property is broken into or damaged an event that's covered by your policy. However, mold damage, flood damage and termite damage are not covered in most standard policies. Let's talk about why.
While normal water damage caused by things like a burst pipe or a sink overflowing is usually covered, damage from a flood is usually not included. This is because a flood is viewed as a gradual event rather than sudden or random. However, some home insurance policies have a special clause for this type of damage. If your home is at risk from flood damage or sewer and drain protection, consider taking out flood insurance to relocate Protect your home from flooding. In fact, some mortgage lenders require coverage even if your home is in a medium to low risk area. Take a look at the Federal Emergency Call Center (FEMA) Map Service Center to find out what level of risk your home is at.
Mold and termite damage
Mold damage is a preventable problem in the eyes of an insurance company and is the homeowner's financial responsibility. An exception to this is an event that your household insurance will reimburse you for when it is an insured risk. In other words, if the mold, mildew or fungus is due to a specific problem, such as a broken pipe, your policy will cover it.
All over the United States, but most common in cities like Los Angeles, California, New York, NY, and Miami, Florida, Termites and other pests can find their way into homes and wreak havoc. The costs of removing termites and repairing the damage are usually excluded from home insurance. This is partly due to the time it takes for a termite infestation to develop – typically three to five years – and home insurance covers sudden and accidental damage. It's also difficult to gauge when exactly the damage occurred. So if you have changed insurance carriers in recent years, there may be discussions about which insurance provider will pay the costs.
Consider scheduling an annual tool inspection and Termite inspection, and keep an eye on potential problem areas yourself. Are you ready to learn more about what's not covered? Don't forget this 5 things you should know about home insurance also!
Home Insurance Myth # 2: Everything in my home is insured
It is important that you read your policy terms and conditions to understand what items are covered by your insurance. Your personal effects like furniture, appliances, and even your belongings outside the home are usually insured.
However, with home insurance there are restrictions on how many luxury goods are insured. You may also be surprised at what some insurance companies consider a luxury item. Things like expensive jewelry, art, clothing, or computers may not be insured in the event of an otherwise insured incident. Make sure the coverage limits in your policy are sufficient to fully protect you from loss through damage or theft. If necessary, you can pay additional coverage for these items.
To ensure that all of your most valuable items are covered, read the terms of your policy carefully. Consider making an inventory of your belongings. This can be helpful in determining the amount of coverage you need, but also in the event of an unexpected occurrence, you will have records of what you will need to be reimbursed for.
Myth of home insurance no. 3: I am legally obliged to take out home insurance
Another common myth about home insurance is that coverage is required by law. The truth is, none of the 50 US states require home insurance.
As mentioned earlier, your mortgage provider can request home insurance. For example, if your home is damaged by a natural disaster, the insurance not only protects you, but also the mortgage company. You need to protect your investment and the value of the home. That Mortgage clause, a provision added to an insurance policy, protects the Mortgage lender suffer major damage in the event that your property is lost or damaged. It guarantees that the home insurance owes the lender.
Myth 4: Household contents insurance: Bundling insurance coverage is always better
For many people, bundling home and auto insurance can be a great way to get discounted rates on both fronts, but it isn't always the case. There will always be exceptions to what type of coverage will give you the best premiums, so you should always look around on a case-by-case basis.
For example, if you bundle your home insurance with your auto insurance just a year or two before moving to a smaller house or selling your car, you could be stuck at higher rates. Downsize your home is demanding enough on its own, and you don't have to pay more than necessary.
It's generally a good idea to compare prices again after you've moved, sold a car, or otherwise changed anything related to your policies. Your existing plans or packages may no longer be the best option and you may want to try and save money where you can.
Home insurance myth 5: Damage from fallen trees is covered by my neighbor's insurance
For example, suppose a tree falls from your neighbor's garden onto your property during a storm or hurricane. Are you or your neighbor responsible for submitting the application?
It is often a misconception that neighbor insurance should cover damage to your property. However, your neighbor is unlikely to be held liable in most states unless clearly warned of the danger of a tree fall. Otherwise it's just an unfortunate coincidence.
Unfortunate accidents are exactly the reason you need to have good home insurance. You never know what could happen
Myth # 6 of home insurance: The amount of home insurance I need is based on the market value of my home
This statement is wrong. The amount of home insurance you need is based on the cost of rebuilding your home in the event of total destruction. This includes the construction costs and the material. Because you House value based on other factors such as location, Real estate market Trends and real estate nearby, it doesn't affect how much home insurance you need.
Myth 7 of home contents insurance: Buying a policy is not worthwhile
If an unexpected event occurs that damages or destroys your home or belongings, you can be sure that it will not happen to you. Month after month, when you pay your home insurance premium and use it for nothing, it can feel like you are being ripped off. However, insurance can help you save hundreds of thousands of dollars in the event of a disaster.
For example, if a wildfire or storm damages your home and personal effects, your policy can help pay for your home repair or rebuilding, replace your belongings, and pay for temporary housing in the meantime. Or, if a visitor to your property is injured and decides to sue you, your insurance can help cover legal fees. Note, however, that damage caused by you or a family member to your own property is not covered by your home insurance.
The benefits of owning a home are myriad, but it also brings with it many unknowns and costly risks. Household contents insurance is a good way to protect yourself financially. Compare home insurance rates and terms to find the best insurance plan for your needs.