When you are throwing down $150,000+ for a house, you are going to want to protect it from anything that could go wrong. This is where home insurance comes in. Without home insurance, becoming a homeowner can turn a dream into a nightmare in an instant. Home insurance protects you from floods, theft, and all other sorts of natural disasters, which is why most mortgage lenders require you to have it.
However, there are some giant misconceptions about home insurance, so we are going to set the record straight!
Myth 1: Home Insurance is a Rip-Off
The cost of home insurance varies by state, square footage, building costs, and the location’s likelihood of damage. However, the average annual premium runs around $950 nationwide. Broken down that is only an extra $80 that you need to add to your monthly housing budget. So the financial protection that you are getting is well worth the cost.
Let’s say the average home insurance claim was $9,779 in 2014, with the average fire damage claim clocking in around $39,791. Many consumers don’t have anywhere close to that kind of cash laying around. So, if you are experiencing a loss without home insurance, you could be forced to rack up massive amounts of credit card debt to repair your house.
Myth 2: All Home Belongings are Covered
Like any other type of insurance, home insurance has its limitations. A homeowner’s insurance policy is not designed to cover everything. Each policy clearly states what is covered and what is not. While most standard home insurance policies cover damage caused by a natural disaster like a fire or hurricane, some types of personal belongings aren’t covered under basic insurance. If you have valuable art or fine jewelry inside your house, you might need a scheduled personal property policy to cover those items.
Myth 3: All Injuries Within a Home are Covered
If a visitor gets hurt at your house or on your property, your home insurance policy’s liability coverage will typically kick in to cover any claim that is filed. However, that’s not the case if you or a family member gets injured in your own home. If you slip in the kitchen or fall down the stairs, your health insurance is what protects you from injuries, not your homeowner’s insurance.
Myth 4: I Should Base My Coverage on the Market Value of My House
More than half of home buyers mistakenly think they should buy insurance coverage based on their home’s market value. However, for most home insurance policies, rates are based on the cost to rebuild the home, not the value of the home. In fact, in most cases, you need less coverage than the market value of your house.
Myth 5: My Home Business is Covered
Around 61% of home-based businesses in America lack adequate business insurance, according to the Independent Insurance Agents & Brokers of America. That high percentage might be a reflection of confusion among home-business owners because many people assume that they are covered by homeowner’s insurance. So, if you do run a home business, you will want to purchase a separate insurance policy for the company.
The good news is purchasing business insurance is easy. Most of the time you can simply attach a business rider to your existing home insurance policy for about $100 a year. Which will provide about $2,000-$3,000 in additional coverage.
Myth 6: Flood Coverage is Included in Standard Policies
Typically flood insurance does not come included in a standard insurance policy. If you live in a flood zone, you will want to make sure you have the right insurance. If your home is in a flood zone, most of the time, you are required to have flood insurance.