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6 Most Common Homeowners Insurance Myths, Debunked


27th Mar 2020 Insurance & Legal

6 Most Common Homeowners Insurance Myths, Debunked

Purchasing a home is probably one of the most significant financial investments you will ever make, which is why you will want to protect it as much as possible. The best way to protect your house nowadays is by getting homeowners insurance.

One of the biggest questions regarding homeowners insurance is what does it cover. To put it simply, homeowners insurance covers the structure of your house, personal belongings, as well as liability claims. But while insurance does cover a significant portion of your assets, it most certainly does not provide unlimited coverage. This is one of the most common misbeliefs people have about insurance, but it is certainly not the only one. 

To help you get better informed about what insurance does and does not cover, we debunk 6 common myths about homeowners insurance.

1. Home insurance is mandatory

Unlike auto insurance, which is mandatory in almost all states, the government does not obligate homeowners to have home insurance. However, if you have a mortgage on your property, your bank will require you to have homeowners insurance and name them on the policy as well. This happens because lenders want to protect their investments and insurance does that in the case of an unfortunate event that damages your house. 

At the same time, if you purchase a condominium or co-op, the board is most certainly going to require you to buy insurance, to help protect the entire apartment complex. This happens because when you buy a condo, in a way you are buying a portion of a larger entity and that entity’s safety needs to be protected. 

Even though homeowners insurance is not mandatory, it does provide significant financial protection in case of a disaster, which is why you should consider it an important investment. 

2. Mobile homes don’t need insurance

Mobile homes are a great option for people who don’t have the financial means to buy a traditional home. Mobile home parks have started becoming very popular in states such as Florida, Texas or Louisiana, with 2019 statistics showing there were 161,268 mobile homes in these three states alone.

Mobile homes are very convenient, as they can easily be moved from one place to another and have low maintenance costs, but they also possess the same risks a traditional home would. Again, the law does not require mobile home owners to have insurance, but if you took out a loan to purchase the house, the bank is most likely going to require you to have it insured. Some mobile home parks also require homeowners to have insurance, to protect everyone in the community. This is why you will see mobile home insurance in Florida or Texas being just as common as traditional homeowners insurance. 

3. A standard policy covers natural disaster damage

If you don’t know much about insurance, it’s easy to assume your house will get protection against any sort of situation, but that’s not exactly the case. Insurance policies offer coverage on either named perils or open perils. A named perils policy provides coverage for the perils listed on the list, whereas an open perils insurance provides coverage for all types of losses, except those specifically excluded from the policy.

Natural disasters such as floods, hurricanes, and extreme winds may not be covered by any form of insurance and require a separate policy. This is especially important to have, especially if you live in ana area that is prone to such events.  

4. Home insurance covers all valuables in your house

Standard home insurance only protects your valuables to an extent. Insurance companies usually set strict limits for high-value items, and sometimes these limits can be very low. This means that, if your valuables are worth more than the amount covered by the insurance policy, you may be putting them at risk. 

It is recommended that you buy additional coverage for high-value items in your home so that you can rest assured knowing they will be protected. Additional coverage comes in the form of an endorsement, collectibles policy or fine arts floaters. While this means pulling more money out of your pocket, such policies cover the items even if they are not inside of the home when they get damaged or stolen. 

5. Landlord’s insurance policy covers renters as well

If you are currently living in a rented apartment, it may be good to know that, even though they have insurance, it won’t cover your lost possessions. Many renters don’t seem to know that, which is why only 40% of them own renters insurance. 

If you want your goods to be fully protected, renters insurance is your only option. Usually, the average premium costs around $200, which is not a major investment if you come to think of the benefits.

Even though renters insurance is not mandatory, many landlords ask their tenants to carry insurance, to avoid unpleasant surprises in the eventuality of theft or disasters. However, even if the landlord does not require it, you should consider getting renters insurance if you want to secure your belongings. 

6. Home insurance covers the house’s market value

Some people think their coverage limit should be the same as the house’s current market value. Well, that may not have the best outcome. When insuring your house, it is best to insure it for the cost of rebuild, rather than for the market value. The costs for rebuilding your house from the ground up may be higher than your house’s actual value, so you may risk not receiving the coverage you need. 

Ideally, you should carry enough insurance to cover the rebuild of your house, as well as some other additional costs. Rebuild costs are on a continuous rise, as the cost of labor and materials is increasing constantly. This is why you should discuss with your insurer annually, to ensure your coverage is enough to reconstruct your house in case of damage.

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