Home Insurance Myths Debunked

You never know when a disaster will strike and damage your home – whether it be storm, fire, or a burglary. One way to ensure you have financial protection is through home insurance. However, there are many home insurance myths that can lead to a costly discovery of gaps in coverage.

Common misconceptions around home insurance include what it does and doesn’t cover, what type of plan is best, and whether you legally need coverage. Here we debunk 7 of the most common home insurance myths.

Home insurance myth #1: It covers mold, floods, and termite damage

One common misconception is what home insurance covers and does not cover. Homeowners insurance will reimburse you when your home is burglarized or damaged by an event that your policy covers. Most standard policies do not cover mold damage, flood damage, and termite damage. Let’s talk about why.

Flood damage

While insurance typically covers normal water damage by a broken pipe or overflowing sink, damage from a flood is not. Insurance considers a flood a gradual event rather than sudden or accidental. However, some home insurance policies have a special clause for this type of damage. If your home is at risk of flood damage, consider purchasing flood insurance. Some mortgage lenders require coverage even if your home is in a moderate-to-low risk area. Check out Federal Emergency Management Agency (FEMA)’s Map Service Center to find out what level of risk your home is in.

Mold and termite damage

Mold damage is a preventable problem and is the homeowners financial responsibility. If mold, mildew, or fungus is a result of a specific problem, such as a burst pipe, your policy will cover it.

All across the United States, but most commonly seen in cities like Los Angeles, New York, and Miami, termites and other pests can find their way into homes and wreak havoc. A homeowners insurance policy excludes the cost to remove termites and repair the damage. This is due in part to the timespan it takes to develop a termite infestation – usually three to five years. Homeowners insurance covers damage that is sudden and accidental. It’s also difficult to gauge when exactly the damage occurred. If you’ve changed insurance carriers in the past few years, there may be some debate on which insurance provider would cover the cost.

Consider scheduling a yearly mold inspection and termite inspection, and be sure to keep an eye on potential problem areas yourself. Learn more about what isn’t covered and don’t forget these 5 things to know about home insurance.

Home insurance myth #2: Everything in my house is covered

It’s important to read through your insurance terms to understand which belongings are covered by your insurance. Your personal belongings, such as your furniture, appliances, and even your belongings outside of the home are typically covered.

Home insurance policies have limits on how many luxury goods they cover. They may not cover things like expensive jewelry, art, clothing, or computers. Be sure that the coverage limits in your policy are adequate to fully protect you against loss due to damage or theft. If necessary, you can pay to include additional coverage for those items.

To ensure your policy covers all of your most prized items, read the terms of your policy carefully. Consider creating an inventory list of your belongings. This can be helpful when determining the amount of coverage you need, but also in case of an unexpected event, you’ll have documentation on what you need to be reimbursed for.

Home insurance myth #3: Law requires I have homeowners insurance

Another common homeowners insurance myth is law requires coverage. The truth is, none of the 50 states of the U.S. require you to have home insurance.

Homeowners insurance covers not only you when there is damage to your home by a natural disaster, but the mortgage company too. They need to protect their investment and the value of the home. The mortgagee clause, a provision added to an insurance policy, protects the mortgage lender from incurring a major loss. It guarantees that the homeowners insurance company will owe the lender.

Home insurance myth #4: Bundling coverage is always better

For many people, bundling home and auto insurance can be a great way to reduce rates on both fronts, but this isn’t always the case. There will always be exceptions to what type of coverage will give you the best premiums, so you should always shop around on a case-by-case basis.

For example, bundling your home insurance with your auto insurance just a year or two before moving to a smaller home or selling your car could get you stuck with higher rates. Downsizing your home is challenging enough on its own, and you don’t need to be paying more than necessary.

It is generally a good idea to compare rates again after you move, sell a car, or otherwise change up anything related to your policies. Your existing plans or bundles may no longer be the best option, and you may want to try to save money where you can.