10 Home Insurance Myths

Here are 10 of the most commonly held myths related to home insurance:

Myth #1: Standard home insurance covers flood damage.

Fact: Standard home insurance does NOT cover damage caused by a flood. If you feel that you need coverage for a flood you should purchase a separate flood insurance policy.

Myth #2: The Medical Payment portion of my homeowners insurance will cover injuries to me and my family.

Fact: MedPay, a common feature of standard home insurance policies, is there to protect you in the event that someone other than you or your family (a neighbor, friend, etc) gets hurt on your property and they do not want to sue you. MedPay will typically cover up to $1,000 for each covered claim to someone outside of your family. If you or your family, however, gets hurt on your property they are not covered by your home insurance policy.

Myth #3: If my home is ever lost, my insurance company will reimburse me for whatever I tell them I owned at the time of loss.

Fact: In the event of a covered loss your home insurance company will ask you to make a list of everything you own and include specific details such as purchase price, date of purchase, serial numbers, etc. (Imagine trying to do this from memory!) The best way to avoid this situation is to have a home inventory already put together. Make sure to include photos, receipts, serial numbers and anything else that will help you prove ownership. Don't risk not having everything replaced in the event of a disaster. Make sure to keep your inventory in a fire proof safe or at a friend's house so it is still around when you need it!

Myth #4: If I file a home insurance claim, my home insurance premium will definitely go up.

Fact: While many home insurance companies do look at your claims history, there are many other factors that determine how much you will pay for home insurance. Filing one claim over a period of a few years might not increase your home insurance premium. To be on the safe side, always think twice before filing a claim for minor damages to your home. Consider your deductible. If the total cost of repair is not too much more than your deductible you might want to consider paying for the repairs yourself. While this might cost you more upfront, it might save you from an increased premium. If, because of a stroke of bad luck, you have to file multiple claims over a period of a few years and your premium is steadily increasing, rest assured there are other ways to save on your home insurance. Ask your home insurance agent about home insurance discounts. Sometimes simply installing a smoke or burglar alarm system; or by insuring your auto policy with the same company as your home policy, you can save a great deal of cash.

Myth # 5 All of my valuables- like jewelry -will be covered in the event of a burglary.

Fact: There are limits on the amount of coverage you can receive for valuables such as jewelry, furs, etc. For example, most companies put a cap of $1500 on total jewelry lost during a burglary of your home. If you find that your jewelry values over $1500 you should talk to a home insurance agent and schedule an endorsement on your policy giving you additional coverage.

Myth # 6: My home insurance covers mold and/or other issues related to lack of maintenance.

Fact: Actually, a standard home insurance policy does not cover issues related to a lack of maintenance. For example if a plumbing leak that was left unfixed caused mold to grow in the interior walls of your home- mold removal and remediation would NOT be covered in your home insurance. Remember that your home insurance only protects you from damage caused by covered perils such as wind, hail, lightening, fire and theft. Keeping your home well maintained and safe for others is your responsibility and your home insurance company will decline coverage for maintenance related claims.

Myth #7: Flood Insurance is only for people who live in a flood zone.

Fact: Lending institutions, such as the bank that holds your mortgage, will require you to obtain flood insurance if you live in a standard Flood Zone. However, keep in mind that all homes are at risk for flood and standard home insurance policies do NOT cover flood related damage to your home. Due to the recent flooding in the Midwest the importance of this type of coverage for homeowners outside of a standard flood zone has become even more apparent. If your home is flooded and you do not have flood insurance you will be on your own to replace your home and its contents. Flood insurance is a wise idea for every homeowner.

Myth #8: I will have to skimp on my coverage in order to save money on my home insurance.

Fact: Saving on your home insurance does not mean that you have to give up important parts of your coverage. It is very important to always be adequately insured in the event of a loss. However, there are lots of ways that you can save money on your home insurance that do not involve changing your coverage. Home Insurance discounts are available for homeowners who use burglar alarms, smoke alarms, deadbolts and other protective devices. Want more savings? Ask your agent about combining your home insurance and your auto insurance policies- you can usually save up to 15% this way.

Myth #9: When determining my coverage, I should use the purchase price for my house as my dwelling coverage amount.

Fact: A common mistake when homeowners are getting quotes for their home insurance is that they use the purchase price of their home to determine their dwelling coverage. Yet, the purchase price of your home includes the land under your home- which does not need to be replaced in the event of a fire or other peril to your home. For this reason, your dwelling coverage should always reflect the replacement cost of your home- or how much it would cost to rebuild your home in the event of a total loss. To determine this amount, multiple the sq. footage of your home by local construction costs.

Myth #10: You can not buy a home without purchasing homeowners insurance.

Fact: This is a tricky one. Because while you actually CAN buy a home without home insurance (a lender may not require it or you may, although rare, pay cash for the home) you should still always have home insurance on any property you own. Whether a lender requires it or not, the risk is always there. It would only take one fire or lightening storm to destroy your home and leave you uncovered.

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What You Should Know About Home Insurance

Framingham, MA - One of the things people rarely pay much attention to when they buy a property is whether they have adequate dwelling hazard and liability insurance, otherwise known as homeowner's insurance.

Getting a policy is easy and almost always obtained when someone closes escrow on their home or rental property. But is it the right type and amount of insurance? Most people reading this article probably would admit that they have no idea about their homeowner's coverage, but they should know, considering it protects their largest asset.

Let's run through a few basics so that you can help yourself understand your policy and ensure you have the proper coverage in place for your needs. Go head and pull out your insurance policy binder, it's about 40 pages thick, then flip to the third or fourth page that contains line items like: Building/Dwelling, Separate Structures, Personal Property, Loss of Use, Medical, and Extended Replacement. This section also includes corresponding amounts of maximum coverage, which tells you how much coverage you have in case of a loss. You need to look at each line item of coverage and discuss with your agent if you believe that amount is sufficient.

Building/dwelling coverage

The top item is usually for building/dwelling/property and that covers the cost to rebuild your property for covered perils like fire, wind damage, vandalism, etc. The coverage is based on your selected estimate of the cost to rebuild the structure, not the land value as land rarely gets destroyed and regardless is not covered by insurance. Additionally, your normal policy does not cover earthquakes or floods, either, but you can get separate policies for these if you are in earthquake or flood-prone areas. Policies for these perils can be expensive, but you decide if it's worth it. Other items are also not covered like wear and tear, so talk to your agent about what is and what isn't covered.

While your agent can help you estimate how much coverage you need for one of the line items like building/dwelling (e.g., $400,000 coverage for a 2,500 square foot house based on the size, quality of building materials, age of property, etc), you ultimately pick the dollar amount of coverage. Don't under-insure, but don't over-insure, either. Most important is to make sure to review your policy each year and increase your coverage to an appropriate amount if local building costs increase.

Liability coverage

Many people don't know this, but you also have liability coverage with your homeowner's policy. For example, if your dog bites someone or if someone slips on your property and gets hurt and you get sued, the insurance provider will step in and pay for a lawyer to defend you and/or pay any settlement or judgment against you. But that coverage has a limit of how much they will pay, usually about $300,000. If you have net worth above that, you can buy additional liability coverage called an umbrella policy in increments of $1,000,000 of additional coverage. It's dirt cheap, too, like $350 per year for an additional million dollars in coverage, so go for it if you think you need it.

Deductibles

The deductible amount is chosen by you. A deductible is how much you pay out of pocket for a loss. If you have a $500 deductible, and there is a $7,500 loss, you pay the first $500 and the insurance carrier pays the other $7,000 up to your maximum covered loss. The higher the deductible you choose, the lower the annual insurance premium you pay. Likewise, the lower the deductible, the higher the annual insurance premium you pay. Discuss this with your insurance professional and decide what makes sense for you.

HOA/common interest development properties

If you own a unit in a condominium, townhome, co-op, PUD or any other common interest development, whether a personal residence or an investment property, make sure you have an interior HO-6 policy that covers you for damage to the inside of your unit, PLUS for liability. This isn't covered by most homeowners association's master insurance policy.

You don't want to wait until you or your tenant accidentally floods the nine units below you and every one of those nine owners is looking to you to reimburse them for their losses. Your HO-6 policy should cover this liability and damage – discuss the coverage with your agent. You should also get a copy of your HOA's master insurance policy and meet with your personal insurance agent to determine if there are any gaps in coverage.

Specialty items

Additionally, normal policies don't cover expensive jewelry, artwork, firearms, precious metals, etc. If you have expensive "other" items, make sure to discuss these with your agent and get the proper coverage in place.

The last item to note is that insurance is for major financial losses that will cause a disruption to your life and livelihood if you did not have the coverage in place to pay for all the damage. You generally should not make small claims because the insurance carriers will raise your rates and/or eventually if you make enough minor claims they may drop you from coverage. Reserve making claims for when everything hits the fan.

Having the proper type and amount of insurance in place is vital in today's world. Pull out your policy and schedule a talk with your agent to discuss what you have and what you need. This should help you sleep better at night by knowing if there is a big loss, you've got some help on your side.

                                                          

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