6 Homeowners Insurance Myths to Ignore
Dispelling Common Misconceptions About Your Coverage
Purchasing a home is one of the largest investments you'll make and you'll want to protect your interest in it, along with your valuables, which means carrying homeowners insurance.
At a high level, a home insurance policy covers the structure of your home, your personal belongings and liability claims against you. While it's meant to protect you from many of the perils that could hit your humble abode, homeowners insurance doesn't offer unlimited coverage for every possible mishap.
Keep reading to learn six myths about homeowners insurance you should avoid when considering your own coverage.
1. My coverage limit should match my home's value.
Many homeowners mistakenly think it's a smart move to base the coverage for their home's structure on its current market value. That's not the best route to take, however. Your purchase price can be more or less than what it would cost to rebuild your home in the event of a loss, the Insurance Information Institute says. You'll want to carry enough insurance to cover a rebuild, and then some.
2. My business is covered.
If you're the owner of a home-based business, you'll need to look outside your standard homeowners insurance policy for coverage. Most home insurance policies exclude business liabilities, according to the III. Your best bet is to consider purchasing a business insurance policy that includes property and liability coverage, such as a business owners policy. A BOP is typically dedicated to small and medium-sized businesses — those that make less than $5 million in revenue and employ 100 or fewer employees.
Along with property and liability coverage, BOPs include business interruption insurance, which covers the money you'd lose if your home suffers damage and you need to close your business, the III says.
3. Flood damage to my home is covered.
There are some instances when water damage might be covered by your homeowners policy, but a flood event isn't one of them. You'll need a separate flood insurance policy, which is largely available through the National Flood Insurance Program. The NFIP is administered by the Federal Emergency Management Agency and flood policies are available through insurance carriers who participate in the program. Additionally, there are several companies that offer private flood insurance. Flood insurance is required if you live in a flood zone, but you can still purchase it if you don't.
More than 20 percent of flood claims come from low- to moderate-risk areas, according to FEMA.
4. My jewelry and family heirlooms are covered.
A standard homeowners insurance policy includes very limited theft coverage for jewelry and other special valuables — somewhere in the neighborhood of $1,000 to $2,000. If you have jewelry or other sentimental items that are worth more than your policy's limit, you'll need to either raise the limit on your homeowners policy or purchase an endorsement or rider to add to your policy. Types of riders include jewelry, artwork and silverware.
5. Injuries that happen in my home are covered.
The truth in this statement depends on the person who suffered an injury under your roof. If you or a family member who shares your home is injured, you wouldn't be able to file a claim under your homeowners policy; you'd file a claim through your health insurance instead. However, if a guest suffers a bodily injury, your liability protection would kick in. Liability coverage protects you from lawsuits up to your policy's liability limit.
6. My policy covers termite damage.
A termite infestation is excluded from a standard homeowners insurance policy. Insurers expect you to maintain your home, and an infestation can arise from a lack of proper maintenance. Have your home regularly inspected for termites and work with a pest control company to eradicate the issue, before it grows into a costly problem that damages the structure of your home.