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Top 10 Myths about Homeowners Insurance

Monday November 4, 2013 9:00 AM

You sign on the dotted line and just like that, you're insured. You don't take time to read the pages and pages of fine print because well, who has time for that anyway? Be careful! Your homeowners policy was not created to be easily understood. And you may have some wrong assumptions or understandings about certain very important coverages. Want to know more after reading these myths? Call your agent. They'll be happy to walk you through your policy so that you understand the mumbo jumbo jargon. It is your responsibility to understand it all!

Myth #1-Your standard policy covers floods.

Unfortunately, most standard policies do not cover water damage that is caused by flood. Flood insurance is mandated in certain flood zones. However, just because you're not in a flood zone doesn't mean it couldn't happen to you. Look at your area's flood plain map. You might be close enough that it is worth purchasing a flood insurance policy.

Myth #2-The Medical Payment part of your policy will cover injuries to you or your family

This is actually liability insurance for OTHER people that get injured on your property. This would be anyone OTHER than you or your family (such as a neighbor or friend) that gets hurt on your property and decides to sue. For example, if your fail to shovel your walkway and someone slips and falls.

Myth #3- If you experience a loss, your insurance company will reimburse you for whatever you tell them you owned at the time.

Insurance companies are going to want some kind of record of what you owned. Doing it from memory is very hard. Keep a list of all of your valuables in your home, including what you paid for them (receipts), serial numbers, photos, date of purchase etc. You are going to need to prove ownership, especially for expensive items that you want to be reimbursed for. Keep the inventory list somewhere away from you home in case it is destroyed. Your agent would be happy to keep this copy for you. In fact they'll be happy you're taking the right steps to protecting your things!

Myth #4- If you file a claim, your premiums automatically go up.

Well, this is a tricky one. Your premiums will not necessarily go up. There are a lot of factors that go into determining your premiums. One claim may not make an impact, multiple claims will certainly make a difference. Be careful with filing a claim. If it's close to the deductible, you may be better paying out of pocket. A restoration professional can consult with you on the estimated cost of repairs. You may be able to know before the work begins if you'll need to file a claim or not.

Myth #5-All of your valuables, including jewelry, guns, etc, will be covered in the event of burglary.

Most policies will have limits on what coverage you have for valuables above a certain amount. For example, most companies put a cap of $1,500 on total jewelry lost during a burglary. You may want to consider an additional endorsement on specific valuables which can offer more coverage.

Myth #6-Your home insurance covers mold and other problems caused by lack of maintenance.

Mold is typically not covered under a homeowners policy because it assumes that the mold is a result of a improperly dried water damage or general neglect. Homeowners insurance is intended to cover losses caused by perils such as wind, hail, lightening, fire, and theft.

Myth #7- You only need flood insurance if you're in a flood zone.

People located in the flood zone are mandated to have flood insurance through the National Flood Insurance Plan. However, many people experience floods who are outside of that area and they are not covered by their homeowners policy. You may still be at high risk. Find out when the floodplain was last mapped. Check with your agent to see if you are at risk or near the flood zone. Water damage from flood is incredibly costly and it may have to be an out of pocket expense without the proper coverage.

Myth #8- You have to have minimal coverage in order to save money on your policy.

Not true. And minimizing coverage may save you money but puts you at a much greater risk of paying out of pocket if something were to happen. You want to make sure you are adequately insured, or your policy doesn't mean much. Many insurance companies offer discounts for preventative measures such as security systems, smoke alarms, etc. Sometimes bundling your package can save you money. Don't compromise coverage for cost, you may regret it in the end.

Myth #9-When you determine your coverage, you should use the purchase price for your house as your coverage amount.

When getting coverage for your home, you only need to include coverage for the parts of your home that need to be replaced if something happens. The purchase price of your home includes the land underneath which would not incur costs to replace in case of a disaster. Coverage should reflect the replacement cost of your home, or how much it would cost to rebuild your home in the event of a total loss. Consult with your agent on what this amount should be for your area.

Myth #10- You cannot buy a home without purchasing homeowners insurance.

You actually can buy a home without homeowners insurance. Some lenders may not require it, or you may have paid for the home in cash. It is risky to have a home that is not insured. With the amount of money you have spent to purchase the home, the risk of losing some or all of it in a disaster is too big of a gamble.

More questions? Call your insurance agent. They are the pros and are there to help YOU!