Ten Home Insurance Myths

Your homeowner’s insurance policy provides valuable protection against financial loss in the event of fire, burglary and other risks. Read your policy and be aware of what it covers.

Below are ten myths about home insurance:

Myth 1 – A homeowner’s policy will cover you against anything that happens to your home.

Your policy probably has a number of built-in exclusions. In the United States, homeowner’s policies do not cover floods and many exclude earthquakes. Make sure that you read your policy and note the exclusions. Take additional insurance where necessary.

Myth 2 – the insurance company will tell you if you are under-insured.

The truth is that the insurer relies on you to determine the value of your home and contents. Ensure that you revise the value regularly.

Myth 3 – you should insure your home against its purchase price.

Homeowner’s insurance covers the cost of the structure, the contents and personal liability. It does not cover land. Find out what it would cost to re-build the house at current prices, and cover the buildings at full replacement-cost. The value could be more or less than the purchase price.

Myth 4 – you are wasting your money if you don’t claim.

Insurance should be reserved for major losses. Small claims should be avoided as frequent claims will probably result in higher premiums.

Myth 5 – the greater the insured value, the more you are paid when you claim.

Over-insuring your valuables is a waste of money. The insurance company will only pay what your property or possessions are worth.

Myth 6 – homeowner’s insurance is compulsory for homeowners.

A bank will insist on insurance as a precondition of a home-loan. If you own the property outright, it is highly advisable, though not compulsory, to be insured.

Myth 7 – In the event of a claim, the insurance company will know what your goods are worth.

The insurance company will only have a reliable guide if you keep an itinerary of your valuables. An itinerary could prove invaluable for insuring for the right value and in the event of a claim.

Myth 8 – all valuables are covered by your policy.

Most policies limit the value of unspecified items. Valuable items such as jewellery, cameras and cell-phones should be specified separately on a policy endorsement.

Myth 9 – contents are always covered at replacement value.

Most policies cover household contents at cash-value, but have an option to cover at replacement value. Cash value takes the depreciation of an item into account. Some will simply replace items with the cheapest available equivalent. Before signing, be sure that you know what is covered.

Myth 10 – if you insure with two companies, you will have double the cover!

It is illegal to insure the same item more than once, and an attempt to claim from two companies for the same loss constitutes insurance fraud.

Many people have only a vague idea about what their homowner’s policy actually covers. Knowledge of the policy gives you the opportunity to get the most out of your homeowner’s insurance.