5 Myths About Home Insurance

Purchasing a home is one of the largest investments you'll make. You've carefully selected the neighborhood, the school system, the number of bedrooms and bathrooms, the yard, and the amount of storage needed. But have you thought about how you are going to protect your investment if the unthinkable happens?

Even though home insurance is one of the most common types of insurance, it's often the least understood. Here are the top five Homeowners insurance myths, debunked:

Myth #1

As long as I have home insurance, I'm covered in case of a flood.  This is one of the most common myths about home insurance and often an unpleasant surprise when flood damage actually occurs. Your home insurance policy will usually only cover damage from weather events like tornado, hurricane, ice storm and wildfires. And while there are some instances where water damage may be covered under your insurance policy, damage caused by a flood is not one of them. You will need a separate flood insurance policy or flood coverage added to your home policy to protect your home in case of a flood.

Another myth relating to floods is that you don't need a flood insurance policy if you don't live in a high-risk flood zone. But, more than 20% of flood claims come from homes outside of high-risk flood zones, according to the National Flood Insurance Program. You can purchase a flood policy through an insurance agent, or through an insurance company that participates in the National Flood Insurance Program.

Myth #2

My collectibles are covered under my home insurance policy. Many people think that once they purchase a home insurance policy that everything inside their home is now covered under that policy in case of damage or theft. Standard insurance policies do cover things like your furniture, clothing, televisions and computers, but high value belongings - such as diamond jewelry, artwork or collectibles - are subject to a set limit. That means if these items are damaged or stolen, you will only be paid out the limit on your policy (usually between $1,000-$2,000), as opposed to its actual worth. In order to have your valuables protected, you will need them to be "scheduled," which means they are covered up their value.

Myth #3

I should insure my home for what I paid for it. Failing to have enough insurance to cover the cost of rebuilding your home is one of the costliest mistakes that homeowners can make. The reality is that people don't expect catastrophes to happen to them, and they don't think about what they will need if their home is destroyed in a fire, tornado, or other catastrophic event. With rising labor and supply costs, the cost to rebuild your home could be significantly higher than its purchase price. And if you live in an older home, the rebuild will need to be completed according to current building codes that could drive the price up even higher. You should review your homeowner's insurance policy on an annual basis, to make sure you have enough coverage to rebuild. The difference in premium in most cases will be minor - but well worth the peace of mind.