If you’re new to the home buying process, it can be a lot to take in. There’s so many aspects to buying and owning a home, and strange terminology to learn. While we don’t want to bore you with the gritty details of the insurance world, we do want you to understand what to expect with a homeowners insurance policy.
Here are four myths about home insurance that need to be busted.
Myth 1: If My Belongings are Destroyed in a Disaster, My Homeowners Insurance Will Cover It
No one plans for the unthinkable – a disaster destroying your home and everything in it. But, you can plan to protect your investment of your home with homeowners insurance. The trouble with this myth is that it circulates primarily because people aren’t aware of the difference between Replacement Cost Value and Actual Cash Value. Without the right coverage, you may receive a much lower payout than you were expecting and find yourself unable to repurchase many of the belongings you lost. Actual Cash Value covers only what your belongings were worth on the day they were damaged or destroyed. To cover the cost of buying new items as a homeowner, you must have Replacement Cost Value coverage.
Myth 2: Homeowners Insurance Policies Cover Floods
When people think of home insurance, they typically believe that an insurance policy protects them from every possible disaster. However, that’s not the case. Standard homeowners insurance does not cover damage caused by flooding. If you live in an area that has a flood risk, flood insurance should be purchased to protect your property.
Myth 3: Homeowners Insurance Covers Termite Damage
You move into a home, and unbeknownst to your, so do some unwanted guests: termites. While a termite inspection is typically standard for a home inspection BEFORE you purchase a home, if the pests move in AFTER you have, your insurance might not cover the damage. This is because pests are typically considered a prevented disaster. Identify problems such as termites and other pests early to avoid paying thousands of dollars in repairs.
Myth 4: The Insurable Value of My Home is Based on Its Market Value
It’s important to know the difference between these two values. Market Value is based on what your home would sell for if you put it on the market today. Insurable Value is calculated as what it would cost to completely rebuild your home. Rebuilding your home is likely to be more expensive than its market value. If you’re worried you won’t have enough money to completely rebuild your home if it is destroyed, factoring into your homeowners policy how much construction and labor would cost could help bridge the gap.
These are just a few myths that circulate in the insurance industry. If you would like professional guidance and a valuable partner to understand your specific insurance needs, give us a call. Protecting Your Good Life is what we do.