As a consumer, you always want to make sure you know exactly what you’re paying for. This is especially true when shopping for home insurance. Educating yourself about the 4 popular home insurance myths below will help you protect the biggest purchase of your life.
1 – Home insurance is mandatory.
Home insurance differs from auto insurance because it is not mandatory by government regulation. Although it is strongly recommended, if there is no mortgage on the home you are not legally required to purchase home insurance. That said, if you opt out of purchasing home insurance, you would be financially responsible for any damage to the property, as well as injury and losses that occur on your property for which you are legally liable.
2 – All of your valuables are covered.
It is very important to read the policy wordings you receive when you set up a home insurance policy. Many people receive their policy wordings in the mail and never review it. This document contains vital information about your policy limits and restrictions to your coverage.
Some clients are under the impression that all of their items fall under their personal property limit. This is not the case. When reading the wordings, you can determine if all of your valuables fall into the limits or if you need to insure them separately as scheduled items. This is often the case with expensive jewelry.
3 – You will get market value for your home.
With the real estate market always fluctuating, it can be confusing when trying to determine what you would receive if you had a total loss. When insurers are determining your home value, resale or market value is not a consideration. Simply put, a home that has a market value of $1,000,000 may still only cost $400,000 to rebuild. The insurer is not concerned about the price that a buyer is willing to pay for a home. Instead, an insurer determines the cost to rebuild the property and rates the property based on that number.
When setting up a home insurance policy, several questions are asked to help determine how much it would cost to rebuild your home, exactly the way you had it, before the loss. This is why it’s important to be certain you have guaranteed replacement on your home. This ensures that if it costs more than the rebuild cost pre-determined by the insurer, the insurer would still pay for the full rebuild.
4 – Flooding and sewer back up is covered.
When setting up a home policy, some coverages are automatically included and some are optional. There is an assumption that anything that happens to a home is covered, but coverages are policy-specific.
For example, if your basement floods and you didn’t opt for water coverage, the loss will not be paid for by the insurer. There are many variations for water coverage, so make sure your policy reflects your needs.
At our agency, our comprehensive water covers sewer back up and flooding whereas many companies only cover sewer backup. You should always ask your company what is included and make yourself fully aware of all optional coverage to better determine if it’s worth the extra premium for your unique situation.