There are a lot of misconceptions around homeowners insurance — from who needs to buy it to what’s actually covered. But regardless of what you’ve heard, experts agree it’s essential financial protection for your home, belongings, and all of your assets in the event of the unthinkable.
We break down some of the most common homeowners insurance myths.
Myth #1. Homeowners insurance is required by law
False — homeowners insurance is not required by law in any of the 50 U.S. states or Washington, D.C.
However, most mortgage lenders require proof of homeowners insurance coverage before they’ll sign on your loan. Lenders do this because until you pay off your mortgage, they have a financial stake in your home and want to ensure it’s covered from fire, hail, wind, and other disasters.
Myth #2. Homeowners insurance is too expensive
False — the average cost of homeowners insurance is around $158 per month, according to the latest rate data from Quadrant Information Services as of March 2022.
It’s possible to score even cheaper rates by opting for lower coverage limits, a high deductible, and shopping around for low rates with an insurance marketplace like Policygenius.
Insurance companies also offer a slew of discounts to help you lower your premiums, including ones for owning a newer home, going years without filing a claim, not smoking, living in a gated community, and more.
Myth #3. Homeowners insurance isn’t worth it
False — homeowners insurance can mean the difference between rebuilding your home and replacing your personal belongings after disaster strikes or losing all of your belongings and being forced to move — or worse.
To put this into perspective, the average home insurance claim caused by a fire or lightning strike is a sobering $79,785, according to the Insurance Information Institute. [1]
So if you don’t have a cool $80,000 on hand to pay to rebuild your home, replace your belongings, and pay for hotel bills and other living expenses while your home is being rebuilt, you’re going to be in serious financial distress.
And let’s not forget homeowners insurance also protects your personal liability as well. So if a guest gets hurt on your property and you’re found legally responsible, they could sue you for quite literally everything you own if you don’t have homeowners insurance to protect your assets.
Myth #4. I don’t need homeowners insurance — I can make the repairs myself
Maybe — even if you’re a skilled builder, contractor, or DIYer, that doesn’t mean you’ll be able to afford to pay out of pocket for every repair your home may need after a fire, hurricane, tornado, or other unfortunate event.
While sometimes it might make more sense to make the repairs yourself instead of filing a claim and paying your deductible, that’s not always the case.
For example, you likely don’t want to pay out of pocket to replace your roof after a tornado — if you even know how to shingle a roof yourself.
Myth #5. It’s too much work to switch homeowners insurance companies
False — an insurance marketplace like Policygenius will quite literally do all the work for you — for free.
At Policygenius, our licensed insurance agents will help you shop for homeowners insurance by having you answer a few questions online about yourself, your home, and the type of coverage you're looking for — and then they’ll take it from there.
They’ll confirm you’re looking at policies with the right type of coverage for your needs and pull quotes from as many companies as possible to help you find the one that offers the best coverage at the best price.
Then once you choose the company you like, they’ll even fill out all of the paperwork for you, help you purchase your new policy, and cancel your old one. Talk about a win-win-win.
Myth #6. Homeowners insurance covers flooding
False — standard homeowners insurance does not cover flooding.
If a flood damages your home, you wouldn’t be able to file a claim with your homeowners insurance company for the damage.
To protect your home and personal property from water damage caused by flooding, you’d need to add a flood coverage endorsement to your existing homeowners insurance policy (if it’s offered) or buy a standalone flood insurance policy with another company.
Many home insurance companies offer flood insurance policies through FEMA’s National Flood Insurance Program (NFIP), though it’s also possible to find private insurers that offer flood insurance as well.
Myth #7. Homeowners insurance covers any stolen items — no matter how expensive
False — homeowners insurance has special sublimits on how much you can be paid out for certain categories of valuable items, including jewelry, art collections, and expensive tech equipment.
For example, if your coverage limit for jewelry is $2,000 and your $20,000 wedding ring is stolen, your homeowners insurance would only reimburse you a maximum of $2,000.
If you want extra coverage for your most-prized possessions, you can add scheduled personal property coverage to your policy to make sure all of your high-value belongings are fully protected.
Myth #8. The amount of homeowners insurance I need is based on the market value of my home
False — the amount of homeowners insurance coverage you need (your dwelling coverage limit) should be based on the rebuild or replacement cost of your home, not its market value.
The replacement cost of your home is the amount of money it would cost to fully rebuild your home from the ground up in the event it’s completely destroyed.
How much you bought your house for or its current market value has no bearing on how much homeowners insurance coverage you need.
Myth #9. Homeowners insurance covers termites
False — homeowners insurance does not cover termite damage or any other type of pest infestations, including bats, mice, and rats.
Home insurance is designed to protect you from sudden and accidental damage. Since most pest infestations happen over time, insurance companies consider them preventable and won’t cover them.
In fact, homeowners insurance excludes coverage for any maintenance issues and regular wear and tear on your home because they expect homeowners to be responsible for the proper upkeep of their property.
Learn more >> 6 insurance lessons from the homeowners subreddit
