What You Need to Know About the Homeowners Insurance Myths

A home insurance policy can feel very complicated, and there are plenty of myths surrounding its coverage and need. Unfortunately, many misconceptions about home insurance can be harmful to you financially, so it’s important to know all the facts when insuring your home. Take a look at these top home insurance myths and the truth behind them.

1. Earthquakes are covered by standard homeowners insurance FALSE
This is a common myth among homeowners as they know that natural disasters are covered, which means earthquakes are, too. However, in most standard home insurance policies, earthquake coverage is excluded. This is because it is considered a mass-destruction event and, therefore, requires its own policy. If you want earthquake insurance coverage, you must purchase a separate policy.

2. My home-based business is covered by my home insurance policy FALSE
It’s important that you secure the right home business insurance so that your equipment and liability is covered. In many cases, you will need to add an endorsement to your home insurance policy to cover your business equipment, and no homeowner’s policy provides for business liability, so you must have a business owners or GL policy to provide that coverage. .

3. If my home is destroyed, my insurance will cover its current market value FALSE
Let’s say your home was destroyed in a fire. If the property was worth $500,000 at the time, you might assume that’s how much the insurance company will pay you when you file a claim. However, your home is only covered for the rebuilding cost listed on your homeowner’s policy. This is NOT the market value, and it could be more or less than the market value as this does not include the value of the land your home is built on. That could result in a rude awakening at a time when you are already stressed. Rebuilding costs continue to rise because of labor and raw materials, design and local ordinance changes. If you live in an older home, it will need to be reconstructed according to current building codes, which could end up driving expenses up even further. Although an insurer does increase the coverage on a regular basis, it may not keep up with improvements you have made to your home, and in the case of older structures – new requirements such as a sprinkler systems and earthquake structural requirements and built in fire and smoke alarms. It is important to review your coverage amounts with your agents as you make improvements inside and outside your home, as well as every couple of year.

4. Home insurance will replace my belongings with new items MAYBE
The reimbursement that you will receive for your personal belonging that are destroyed by a covered peril will depend on how they are insured. If your items are covered with an Actual Cash Value policy, your insurer will reimburse you for the value of your belongings at the time of the loss. That means you’ll get the depreciated value of your belongings, which might not be enough to replace them at today’s prices. However, if you have Replacement Cost Value coverage, you will be allowed to replace your belongings at today’s prices. You can replace your possessions, regardless of the depreciated value of the items when they were destroyed. Please be aware that not all items are fully under Replacement Cost Coverage under your policy. Many insurers place limits on collections, cash, bonds, antiques, jewelry, firearms, electronic, furs, and other items so noted in your policy document. These will be covered up to a stated amount. You must read your policy coverages and talk with your agent to assure you have adequate coverage.

5. All of my belongings are covered by my insurance
Although standard insurance policies do cover your personal belongings, such as clothing, electronics, and furniture, they have a limit. If you have items that exceed your coverage limits, you will need to add on a rider to protect the rest of your belongings. For example, if you have high-value items such as jewelry, antiques, art, and musical equipment, you may need to schedule them on additional coverage for the ultimate protection.

Safeguard your property with quality homeowners insurance. Contact the team Lou Aggetta Insurance Services in Pleasant Hill to get started on your tailored policy.