Many homeowners think they’re fully protected—until disaster strikes. Unfortunately, insurance myths and simple mistakes can leave you exposed. Here’s how to separate fact from fiction and avoid costly errors.

Myth 1: “My Policy Covers Everything”
Reality: Most policies exclude key risks like:

Floods

Earthquakes

Neglect or poor maintenance

Tip: Consider endorsements or separate policies for excluded perils. For instance, flood insurance is federally backed and must be purchased through the NFIP or a private insurer.

Myth 2: “I Only Need Enough Coverage to Match My Home’s Market Value”
Reality: Market value includes land, which doesn’t need insurance. Focus on the rebuild cost, which is often higher than the market value, especially during inflation or labor shortages.

Mistake 1: Not Creating a Home Inventory
After a disaster, estimating the value of lost items is nearly impossible from memory. Create a home inventory with:

Photos or videos of each room

Receipts, if possible

Cloud-based storage for access during emergencies

Mistake 2: Choosing the Lowest Premium Without Reading the Policy
Cheap premiums often mean stripped-down coverage. Make sure you’re comparing apples to apples. Look at deductibles, exclusions, and customer service ratings.

Myth 3: “I Don’t Need Liability Coverage If I’m Careful”
Reality: You can be held liable for injuries on your property—even if you’re not at fault. Liability claims can include:

Dog bites

Slips and falls

Accidents involving contractors

Mistake 3: Failing to Disclose Home-Based Business Activities
Running a business from home? Most homeowners policies won’t cover business equipment or liability. You may need a rider or a separate business insurance policy.

Myth 4: “Flood Insurance Is Only for High-Risk Areas”
Reality: More than 20% of flood claims come from low- to moderate-risk areas. It only takes a few inches of water to cause thousands in damage.

While most homeowners know the basics of insurance, many don’t realize how much customization is available. The right policy isn’t always the standard one—it’s the one tailored to your needs. Here’s how to go beyond the basics and maximize your protection.

Understand Replacement Cost vs. Actual Cash Value
When it comes to claims, this distinction is critical:

Replacement Cost pays to rebuild or replace without factoring depreciation.

Actual Cash Value deducts depreciation, giving you less money.

Tip: Always opt for replacement cost coverage if you can afford it—it’s worth the higher premium.

Customize Personal Property Coverage
The default coverage might not be enough for high-value items. Consider scheduling additional coverage for:

Jewelry

Art

Musical instruments

High-end electronics

Some insurers require appraisals for these additions, but the peace of mind is worth it.

Add Ordinance or Law Coverage
If your home must be rebuilt after a loss, you may be legally required to bring it up to modern codes. This can be expensive. Ordinance or law coverage helps cover the cost of these code upgrades.

Don’t Overlook Water Backup Coverage
While flood insurance is a separate policy, water backup coverage helps when sewers or drains back up into your home—an often overlooked risk.

Consider a Higher Liability Limit or Umbrella Policy
Standard policies usually cover $100,000–$300,000 in liability, but that may not be enough if you’re sued. A personal umbrella policy can add an extra $1 million or more in coverage, and it’s relatively inexpensive.

Understand the Claims Process
Know how your insurer handles claims:

Is the process online or in person?

How fast is the turnaround?

Are contractors vetted or your choice?

Read reviews and consult with your insurance agent to ensure the claims process is fair and transparent.

Review Annually
Your insurance needs can change:

Renovations increase rebuild value.

Acquiring valuables affects personal property limits.

Local weather patterns may shift, prompting different riders.

Update your policy at least once a year.

Owning a home is one of life’s biggest milestones—and protecting that investment is essential. That’s where homeowners insurance comes in. If you’re new to the concept or shopping for your first policy, this article will break down the basics and guide you toward making an informed decision.

What Is Homeowners Insurance?
Homeowners insurance is a type of property insurance that protects your home and belongings from unexpected events like fires, theft, and certain types of natural disasters. It can also provide liability coverage if someone is injured on your property.

What Does It Cover?
Standard homeowners insurance policies typically include these key components:

Dwelling Coverage: Protects the structure of your home, including walls, roof, and built-in appliances.

Other Structures: Covers detached structures like garages, fences, and sheds.

Personal Property: Covers belongings inside your home (furniture, electronics, clothing, etc.).

Liability Protection: Provides legal coverage if someone is injured on your property.

Loss of Use: Helps pay for temporary living expenses if your home becomes uninhabitable due to covered damage.

What’s Not Covered?
Most policies exclude:

Flood damage (requires separate flood insurance)

Earthquake damage (optional add-on or separate policy)

Maintenance issues (like mold, pests, or wear and tear)

Always read the fine print to understand what is and isn’t included.

How Much Coverage Do You Need?
Here’s a quick checklist:

Rebuild Cost: Ensure dwelling coverage equals the cost to rebuild, not the market value.

Inventory Your Belongings: Estimate how much your possessions are worth.

Liability Limits: A minimum of $300,000 is recommended for liability protection.

How to Save on Premiums
Bundle Policies: Combine home and auto insurance with one provider.

Install Security Devices: Smoke detectors and burglar alarms often lower rates.

Raise Your Deductible: A higher deductible lowers your premium but means more out-of-pocket cost during a claim.

Final Tip
Don’t just shop for the cheapest policy. Look for comprehensive coverage, a reliable insurer, and strong customer support.