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Only 65.5% of US homeowners have home insurance. And yet, the average home costs $3.75 per square foot to repair — that could cost you around $9,000 if your entire house is affected by a flood. With 57% of structures in the US exposed to potentially hazardous natural disasters, why are so many homeowners taking the risk?
Read on to find out the truth about home insurance and how it can save you from significant financial difficulty in the future.
Myth 1: Home insurance isn’t worth the money.
As of 2022, the average homeowner spends $1,393 on home insurance. At the same time, the premium might seem expensive — especially if you don’t think your property is at risk — you never know when it could be a lifesaver. It’s easy to assume it’ll never happen to you. Yet, an unexpected tragedy might destroy your home or belongings at any time.
Wildfires, windstorms, and flooding are all potential risks to your property. In a best-case scenario, the insurance could cost you a couple of hundred or thousand dollars. A worst-case scenario might cost hundreds of thousands of dollars.
Your home insurance policy could help repair your home, replace your belongings, and pay for temporary housing. A thousand dollars a year seems like nothing in the face of such potential risk.
Myth 2: All my belongings are covered.
Whether your home insurance covers all your belongings depends on your policy. Generally speaking, your personal belongings inside and outside the home are protected. However, many policies limit luxury goods, such as jewelry, art, clothing, or computers. You must read through your policy carefully to understand which items are covered.
You might have to pay additional fees to cover everything you want. Consider listing an inventory of your most prized possessions and ask your policy provider what is included.
Myth 3: The premium goes up every time a claim is filed.
It’s not true that making a claim will skyrocket your home insurance premiums. In some instances — especially with extensive claims — your premium might go up. Similarly, if you file regular claims, it might increase. However, most of us might only claim it once or twice in a lifetime.
To avoid unnecessarily raising your premiums, estimate the cost of repairs before claiming. If it’s only slightly less than your deductible, it’s sensible to pay it yourself.
Myth 4: Home insurance covers mold, floods, and termite damage.
Generally speaking, home insurance reimburses you when an event covered in your policy damages your home or property. Many standard policies do not cover mold, flood, or termite damage.
Additionally, many policies won’t cover foundational cracks in walls caused by poor maintenance. However, you can purchase flood insurance separately — it’s a good idea if you’re in a flood-risk area.
Myth 5: You cannot buy a home without buying home insurance.
Many homeowners believe that home insurance is a legal requirement. However, you don’t have to take out a home insurance policy. Most mortgages use your property as security against the loan. If damaged, the lender suffers too. Some mortgage providers might make it a condition of the home loan.
Myth 6: Homeowners insurance is based on the market value of my home.
Your home insurance coverage is based on the cost to rebuild your home if it’s destroyed, including construction costs and materials. Location and property trends affect the market value; therefore, it doesn’t impact your homeowners’ insurance.
If you only insure your home for its market value, the policy may not cover the full extent of the costs needed to repair and rebuild.
Summing up
Homeowners insurance isn’t a requirement. However, it’s sensible for most homeowners to take out a policy that covers their prized possessions. Ensure you know what your policy covers.
Keep your home in good condition if your insurance doesn’t cover damage caused by poor maintenance. Remember, an insurance policy could save you and your finances if something happens to your home. While we all hope nothing will happen to us, why take the risk?
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