Home insurance is an important part of owning a home. Most lenders will require you to have mortgage insurance, but that only covers the lender if your home is destroyed, it will not replace or repair your home. There are a number of popular myths associated with home insurance that confuse people about the coverage they do or do not need, and being misinformed can be a dangerous thing when your family’s home is at stake.
- You cannot buy a home without home insurance.
This is a misleading statement. Most lenders want you to have mortgage insurance to protect their investment, but homeowners coverage is to protect your home. You can buy a home that is not covered by home insurance, but doing so is extremely risky because you never know when a lightning storm, flood or errant driver is going to make your world come crashing down.
- Standard home insurance covers floods.
Standard homeowners insurance covers your home against water damage, but not against flooding. Flooding happens when a body of water overflows onto your property or rises out of the ground. As an example, a broken pipe in your wall causes water damage, while a broken levy creates flooding. Flood insurance is an additional coverage that can be added to your home policy, but it is not included by default.
- Homeowners insurance covers everything (or nothing) that I own.
A typical home insurance policy only covers your personal property up to a certain amount. Your policy will specify that amount as either a maximum dollar value or a percentage of your total home insurance policy value. Check your policy and increase the personal property limits if necessary to make sure everything is insured.
- Damage caused by mold is covered under standard home insurance.
In many cases, mold may be covered, but only if it happens as a result of water damage. If the insurance company can show that the mold is a result of improper maintenance, they can deny a mold remediation claim on the grounds that you have not performed proper maintenance.
- I do not need flood insurance unless I live in a flood zone.
This misconception has been responsible for many homes being lost to flood damage. Flooding can occur in many places that are not designated as flood zones, and most insurance companies will advise you to get the flood insurance rider just to be on the safe side.
- Insuring the purchase price of my home is sufficient coverage.
Your home insurance covers the value of your home and the property it sits on, but it does not cover anything else. In order to have complete protection, your homeowners policy should include the dwelling cost of the home, plus the value of your personal property, plus additional liability coverage to protect you against people being injured or items on your property causing damage to someone else’s property.
- I do not need health insurance because my home insurance includes it.
Actually, the medical payments part of your home insurance policy is intended to pay for injuries to other people, not to you or your family. If a friend or visitor is injured on your property, your insurance will pay for the injuries up to a certain amount, usually $1,000, but it will not pay for the same injuries suffered by you or any family members living on the property.