5 Home Owners Insurance Myths Explained

Jul 29, 2021 | Personal Insurance

Explaining 5 Homeowners Insurance Myths

Home insurance can be complicated to some. If you are a first-time insurance buyer, you are probably feeling woozy with all the technical terms and things you need to know to ensure that your home is properly insured. It will seem complex at first but once you have made your due diligence, everything will make sense to you.

First, you need to scour the web because research is the key. The more you read about it, the more you will understand the general terms used and the many coverages you may or may not need for your property. By researching thoroughly, you will be armed with the know-how before you start to talk to your agent. 

The next thing you need to do is to find a good insurance company in your area. Having them near will help you once you need to file a claim. You can directly go to their office anytime you need to clear things up. It is also advisable to get a knowledgeable insurance agent to help you decide how comprehensive your coverage needs to be. If you did your research, you will find that there are several coverages that will be available for you. A good insurance agent can impart his knowledge based on experience and can help you navigate the ins and outs of getting home insurance. 

It will still be confusing at first, but if you did your research and had a good conversation with your sales representative, you will be able to separate fact from fiction when it comes to deciding on your home insurance.

We explain 5 home insurance myths that you need to know before you sign on those policy papers:

  1. Home Insurance is Required by Law

Home insurance is not required by law. Legally, it is not required in any state. But if you need to mortgage your home, you will definitely need your home to be insured. Most, if not all banks and mortgage lenders would require home insurance as part of your loan agreement. They need to protect their investment in case your house burns down or gets damaged by flood and other natural disasters. Requiring you to have your home insured is one way for them to make sure that their money is safe. 

Even if your house is not mortgaged and home insurance is not required by law, it is still wise to have your home insured to protect you from financial loss in the future. Your home may likely be your largest investment and it needs safeguarding. The cost of rebuilding your home in case of accidents and disasters will be expensive and you would not want to cover the expenses out of your own pocket. 

  1. Flood Damage is Covered

Standard home insurance does not cover flood damages. You will need to purchase a separate flood insurance coverage to protect your home structure. Most basic home insurance only covers water damage if it is caused by a leaking roof, faulty plumbing, burst pipes, accidental water overflow, and the likes. 

Flood insurance is an added coverage that you can purchase in addition to your basic home insurance. If your home is in a high-risk area, it is advisable that you get this added coverage. It will cover physical damage to your property and belongings as well. 

  1. Your Policy Covers all your Possessions

Belongings or possessions are mostly covered by basic home insurance. There are certain items, however, that are not included. Some examples are jewelry, coin collections, antiques, art collections, and other valuables. There are limits for these valuable items and you may need to purchase a separate policy for them to be fully covered. 

The value of these kinds of possessions usually goes higher the older it gets. Insurance companies will be hesitant to insure them because it will be too expensive. There are different options that you can add to your policy to cover them. Talk to your agent to assess how you can protect your high-value possessions. 

  1. Home Insurance only Protects Belongings and Property

Aside from having your possessions and property insured, your home insurance also provides liability coverage. This means that when a person is injured while on your property, your insurance will pay for the visitor’s medical bills. But if the person lives on the property and gets into an accident, health insurance will be used instead of the liability coverage. Your liability coverage will only insure a person who does not reside in your house or inside your property.

Oftentimes, we have visitors in the house. They come and go and accidents can happen anytime. If they are within your property, you are assured that their medical expenses will be covered by your home insurance. In case the injured wants to sue you for the accident, your coverage can help you with your legal expenses as well. 

  1. Home Insurance is Expensive – It’s a Waste of Money

This is probably the most debatable myth in home insurance. Most people will argue that premium payments are expensive and it is possible that you would not need to make a claim in your lifetime. Others counter that having home insurance will give you the peace of mind knowing that your property and belongings are protected in case accidents and disaster happens which can occur anytime. 

In determining home premiums, your insurance agent will help you decide what coverage you need for your property and possessions. 

There are several factors that will contribute to the calculation. Some of these are:

Location of your property

The state where you live can cause your premium to go high or low. The monthly average cost is about USD85 to USD200 depending on your location. If your house is in a disaster-prone area, your premium can shoot up. 

If you live in a high-crime area, you can expect to pay more than those living in a safer neighborhood. 

Cost of rebuilding your house

if you want a more accurate calculation for your home insurance, you need to compute using the cost of rebuilding your house instead of the current market value of your home. After a disaster, you will be looking to rebuild your house and replace your belongings. Most of the time, the cost to rebuild is more than the value of your home. Consider the cost of materials and labor and other things you will need to restore your dwelling.

Credit History

if your credit history is good, it means that you pay your bills and loans on time. Financial behavior is often looked into by insurance companies to determine your credit standing. In short, a good credit score will help lower your insurance premium. IF you have a bad credit history with missed payments and over drafting, your premium will go up. 

Claims History

a history of previous claims can determine the likelihood of future claims. Agents prefer clients who have clean histories because they are likely to do a preventive approach in their homes. They are careful and will do constant repairs to their house to prevent major damages. Discounts are usually given to those who have a clean claims history as well. 

Marital Status

according to statistics, married people tend to be more cautious and files fewer claims thus allowing for a lower premium cost for your home insurance. People who are married take fewer risks because they have someone to think of. 

Age and Condition of your Home

if you live in an older home, materials may be more costly to replace. In a newer home, with all the new fixtures and smart home devices, it may cost the insurer more money to replace. In any case, both old and new homes may be more costly depending on the condition. 

Since the age factor can be looked at in two ways, the condition of your home may be the deciding factor. An old house that is well maintained and made with a few costly materials may not be as expensive as a new house built with smart features thus lowering the premium cost.  

Coverage Amount

if you plan to lower the coverage amount of your policy, your premium will be lower. If you want fuller coverage, you would need to pay more every month to give you the protection you need. Remember, your premium will be higher with the more coverage you get. 

The 5 homeowners insurance myths mentioned above are just a few misconceptions that you need to know about. Not everything you read is true. It is important that you first do your research and then ask your insurance agent about it. Anything that you are not sure about can most likely be answered by your trusted agent. They can be your guiding hand on your first purchase of homeowner’s insurance. 

If you plan on getting your first homeowners insurance or maybe you just want to make sure that you have the right coverage, do not hesitate to contact us at Advantage Insurance Solutions. You can contact us directly at (720) 221-8168, (855) 973-1202, and (855) 712-6584