Knowing the facts makes it far easier to find the right policy for your property.
Key takeaways:
- There are many myths surrounding home insurance
- These fallacies can cause confusion when you shop for policies
- Finding the right coverage to meet your needs is essential
- Understanding how home insurance really works can help
It should come as no surprise that there are many myths surrounding home insurance and how it works. If you’ve ever tried to read your policy to figure out exactly what you’re really getting for your money, you probably quickly realized that you didn’t know as much as you thought you did.
Unfortunately, these myths can make it challenging to find the ideal policy for your home. You could miss out on purchasing adequate coverage because these falsehoods lead you to believe that you’re better covered than you actually are.
Below, we’ve debunked four common myths about home insurance to help you in your quest to find the best policy.
Myth #1: Cheapest is always best
One of the most common myths about home insurance is that all policies are the same, so finding the cheapest option is always in your best interests. Unfortunately, saving money up front could cost you in the long run if your coverage doesn’t provide adequate protection.
For example, an inexpensive home insurance policy might not offer enough coverage to rebuild your home if you experience a catastrophic loss. You would be on the hook for the difference in this scenario, potentially leaving you in significant financial peril.
Cheaper home insurance packages also tend to have higher deductibles, forcing you to pay a significant out-of-pocket amount before the policy kicks in. When you’re going through a tough time after experiencing damage to your home, the last thing you need is another expense.
Finally, some inexpensive policies don’t have adequate liability coverage. If someone gets hurt on your property and sues you, you’ll be glad your policy has enough liability to protect you from litigation.
Understanding your coverage is vital before signing any documents because seemingly cheaper policies could lead to significant financial hardships down the road. The cheapest isn’t always the best, and you’ll need a thorough understanding of any insurance policy to ensure that it works for you.
Myth #2: Homeowners insurance covers natural disasters
You might be under the impression your home insurance policy covers natural disasters. The reality is that while your base coverage should protect against wind, fires, lightning, hail, and volcanic eruptions, it probably doesn’t include other weather events, including earthquake, flood, or snow damage. Whether or not this is a big concern depends on where you live. Earthquake coverage, for example, may not be a big deal in Kansas, but it’s crucial in many areas of California.
There could be policy limits regarding natural disaster coverage, as well. These disasters can do significant damage in short periods, so understanding how much your policy covers and its exclusions can save you from surprising out-of-pocket expenses after a storm.
Flood and earthquake insurance are separate from the rest of your policy. If you need coverage in case of flooding, going through the National Flood Insurance Program can be a good idea. You can purchase this insurance through a private insurer, but the federal government backs the policy. Depending on where you live, flood insurance may be optional, although in some high-risk areas, it is mandatory.
When it comes to earthquakes, your basic policy might cover damage from a fire caused by an earthquake, but not damage from falling debris or an outright collapse. So whether you want to incur the additional expense of purchasing earthquake insurance may depend on where you live.
As you can see, natural disaster coverage can be tricky, so it’s worth your while to ask for a complete explanation from your insurance provider to dispel any myths before you begin. Knowing what your policy covers – and doesn’t cover – can make a big difference if disaster strikes.
Myth #3: Home insurance protects home-based businesses
You run a company from home, so your home insurance must cover its assets, right? Probably not. In fact, your home-based business will likely require a separate policy to ensure full protection.
For instance, you’ll need business coverage for any equipment you use while running the company. These valuables could include computers, furniture, and inventory you store on the premises.
If clients visit your home for business reasons, you’ll also need business liability insurance. This policy offers protection if a customer experiences an injury while on the property. You could also opt for professional liability and commercial auto insurance, depending on the services your company offers.
Myth #4: Your policy covers home repairs
A final myth you might encounter regarding home insurance is that it covers all home repairs. The reality is that while your policy will reimburse you for certain damages to your home, it doesn’t cover every type of home repair.
For example, if your property incurs damage because of a lack of maintenance, your home insurance policy won’t help you. It also doesn’t protect you from wear and tear degradation over the years. You shouldn’t expect your insurance to cover any appliances unless a fire or other covered event damages those devices. The same goes for furniture and other personal property.
The importance of buying the right policy
The more you understand these common myths about home insurance, the easier it will be to find the right policy to meet your needs. Ideally, you want a policy (or policies) that cover your most significant areas of risk while offering affordable premiums and a reasonable deductible if you experience a catastrophic event. Understanding your basic coverage and areas where you might need some upgrades will help ensure that you find a policy that will offer the protection you need – when you need it.
NICRIS Insurance Agency offers home, car, life, renter, and commercial insurance in the state of New York. We build relationships with our clients and help cut through the myths so you can find a policy that suits your budget and your needs. Contact us for more information or to book a personalized insurance review.