Modern day home buyers have a complex list of decisions to make before they finally move into a new house. If you thought, the hard part of owning a new house was all about selecting the right property and getting that at the market best price then you have only heard half of the things! Home insurance is an important decision that every new homeowner has to make before purchasing a property. But, like a lot of financial decisions there are many ‘ifs’ and ‘buts’ that would cloud your mind before you make a final choice. The problems regarding home insurance are also compounded by the ignorance of many fine aspects of home insurance policies. These have led to some common home insurance myths. If you want to purchase the best home insurance policy to keep yourself covered then you need to know about these myths.
Myth #1: Home Insurance is absolutely compulsory
Auto insurance is a must, but home insurance has still not been made into a mandatory act for the homeowners. But insurance papers would be required if you have a mortgage on the recently acquired property. The banks or other lenders would need an active insurance policy with your name on it to go ahead with the financing. If you further want to rent out the property, there are many tenants who would inquire whether or not you have a valid home insurance policy for the property.
Myth #2: Your house is covered even when you are on a vacation
You are not always covered if any major damages are done to the property when you are out on a holiday. Even if you have a home insurance policy, you should take the requisite precautions before leaving home. One such example could be with the heating systems. If you decide to leave home without switching the heating systems off, and that leads to pipes bursting causing water damage to the property, then you will not be covered. Apart from this, the home insurance claim for policies varies according to the length of your vacation. Generally, the insurance companies would like you to arrange for someone to visit your property once in every 3-7 days and report back any abnormalities then and there.
Myth #3: All of my valuables are covered
This is a big misconception, most of the homeowners have. They feel, as their home is sufficiently insured so all the valuable items held within it are also insured. This is not the case! Any standard home insurance policy covers all your personal property and other valuables, but only till a certain limit. There are many sub-limits set in your policy regarding specialty property (such as jewelry, furs, etc.). If you want a full coverage for all the valuables, you might have to opt for additional coverage by paying an extra premium. For adding this additional coverage, you would have to furnish value proof, in the form of receipts, for the valuables in question.
Myth #4: You are protected against flooding
Your claim against flooding depends on the type of water flow causing the flood, in the first place. Most home insurance policies protect you from sudden or accidental entry of water into your home (such as bursting of water pipes, etc.). But the policies do not protect you against overland flooding that is caused by natural elements (such as overflowing river, water flowing from high land into low land, etc.) These are treated as natural calamities and can be covered only by financial assistance programs in the event of disaster announced by the government.
On the other hand, your home insurance policy would cover the damages of a sudden earthquake only if you had opted for an “earthquake rider” on the policy.
Myth #5: Policy covers the market value of the house
Home insurance policies do not cover the market value of your house. They would only cover the replacement or rebuilding value of the house. As an example, if your house burns down, the home insurance policy would cover the costs that may be required to rebuild the house as it was before the incident. Generally, rebuilding value is much lower than market value, as it does not include the value of your land. Getting back to the example, even though your house has burnt down your land is still intact, so the insurance does not include the value of your land. The insurance policy may cover the cleanup and recovery of debris.
Myth #6: Insurance becomes cheaper for older and less expensive properties
It is just the opposite. Insurance would be more expensive for older houses as they have a high chance of damages and things going wrong. It will cost a lot more for the insurance companies to fix things. As compared to the new houses, old houses have various elements such as plumbing and wiring which can fail very easily. New homes with their upgraded materials and systems have least chances of damage in the immediate future.
Myth #7: You are protected against sewer backup
Sewer backup damage is caused to a house when the sanitary or storm water sewer systems fail in handling the high surge in the volume of water. This causes the water to back up into your home through the drains and toilets. Sewer back up can cause significant water damage to a house if it is not detected early. But, unlike the popular belief you are not automatically protected against this act if you have not opted for the optional sewer back up protection while taking the policy.
Myth #8: Landlord’s insurance covers the tenant’s damages
If you, as a tenant, have mistakenly flooded your house as well the neighbor’s it will not be covered by the landlord’s insurance. Same is the case with stolen goods or valuables from your home. To get such coverage you need to have a tenant insurance policy.
Now, that you know about the common misconceptions surrounding home insurance we hope you would use your claims in a wiser way.