Debunking Homeowners Insurance Myths

Homeowners insurance is often overlooked until it’s needed. By the time you’re facing a crisis—a tree crashing through the roof, a burst pipe flooding your basement, or worse—it’s usually too late to rethink any assumptions you had about your policy. There are plenty of misconceptions about homeowners insurance, so let's clear things up to help you make informed decisions about protecting your home in the Sacramento Metro area.

Myth #1: Homeowners Insurance Covers Everything

Many believe that homeowners insurance covers all types of damage or disasters. However, while policies do offer broad protection, there are exclusions. Standard policies often don’t cover:

• Flood damage. This requires a separate flood insurance policy, usually through the National Flood Insurance Program (NFIP) or private insurers.
• Earthquake damage. This coverage is typically available as an add-on or a separate policy.
• General wear and tear or maintenance issues. Insurance handles sudden and accidental damage, not deterioration due to neglect or aging.
• Sewer backups. Standard policies generally exclude sewer or drain backups, but many insurers offer an additional rider for this coverage.

It’s important to thoroughly read your policy to understand what is covered and what is not so that you avoid any unwelcome surprises.

Myth #2: My Home is Insured for Its Market Value

A common misconception is that insurance should match the market value of your home. In reality, insurance is based on the cost to rebuild, not the home's resale value. Market value includes the land and location, while replacement cost focuses on the materials and labor needed to reconstruct the home. With the fluctuating construction costs in Sacramento, it’s crucial to periodically review your policy to ensure adequate coverage.

Myth #3: If Someone Gets Hurt on My Property, It’s Always Covered

Liability coverage in a homeowners insurance policy protects you if someone gets injured on your property, but exceptions exist. If the injury stems from negligence—like ignoring a rotting deck railing—you could be sued for damages beyond your policy limits. Additionally, if you run a home-based business and a client gets injured, your standard policy might not cover it.

Myth #4: My Policy Fully Covers My Valuables

Most homeowners policies have coverage limits for expensive items such as jewelry, artwork, collectibles, high-end electronics, and firearms. Often, policies include per-item or category caps that may be lower than your valuables’ actual worth. This means a valuable item might only be partially reimbursed if it’s lost, stolen, or damaged.

If you own high-value items that exceed these limits, consider adding a scheduled personal property endorsement or rider to insure them for their full appraised value. Periodically review your policy, get appraisals for valuable items, and maintain an updated inventory to ensure you have adequate protection.

Myth #5: I Don’t Need Additional Insurance Because I Work From Home

Many homeowners now working remotely assume their standard insurance fully covers work-related equipment and activities—this is often not the case. While a standard homeowners policy may provide limited coverage for business property, limitations exist on the value of work equipment it will cover and may exclude employer-owned items.

Key Coverage Gaps:

• Limited coverage for work equipment. Policies often reimburse up to a certain limit and might not cover employer-owned items.
• No business liability protection. You could be personally liable if a client, customer, or delivery person is injured on your property.
• Business inventory may not be covered. Standard policies likely exclude theft, fire, or other damage to products stored at home.

Consider options like home-based business policies, business property endorsements, or commercial liability coverage to ensure you are fully protected.

Myth #6: Homeowners Insurance Covers Mold and Termite Damage

Mold and pest damage are generally considered preventable maintenance issues, not sudden damage. Most policies don't cover them. If mold results from a covered peril—such as water damage from a burst pipe—your policy may help with remediation. However, if the mold is due to long-term issues like humidity or slow leaks, it likely won't be covered.

Myth #7: If My Neighbor’s Tree Falls on My House, They Pay for It

This often surprises people. Typically, your insurance covers damage on your property, regardless of where the tree came from. If negligence can be proven, such as your neighbor knew the tree was dead and took no action, you might claim their insurance or seek legal action.

Myth #8: Filing a Claim Always Leads to Higher Premiums

This isn't necessarily the case. Insurers consider many factors when adjusting rates, including claims history, the type of claim, and location. A single small claim might not significantly impact your premiums. However, frequent claims or high payouts may raise rates. It’s wise to weigh repair costs against your deductible before filing.

Final Thoughts

Homeowners insurance isn't a one-size-fits-all solution. Knowing what is and isn't covered can help prevent costly surprises. If you're uncertain about your coverage, it’s a good idea to review your policy with your insurer and ensure you have the right protection in place. Have questions about homeowners insurance and how it affects your real estate decisions? Let’s chat!