While most people recognize the importance of homeowners insurance to protect their investment, there is a great deal of misinformation that can lead to costly errors. My time as an experienced insurance adjuster and an insurance claims attorney has provided an opportunity to cull through these common myths to arrive at a few that simply need to be dispelled. This blog attempts to debunk this potentially harmful misinformation.
Myth 1: Your home insurance policy will provide coverage for upgrades made to your home.
Homeowners insurance coverage is issued based on a premium determined in large part by the potential risk of loss. This means that improvements to your home that increase the value will necessitate a higher premium. If you make improvements to your property that increase the value of your property, you should inform your agent and have your coverage reviewed.
There are other types of improvements that essentially amount to maintenance, but they do not increase the value of your home. If a tree is top heavy and threatening to fall on your home, for example, the cost of cutting down the tree is necessary maintenance. Similarly, deterioration to the roof of your home based on ordinary wear and tear or age will not be covered by your policy. It might not come as much of a surprise that your insurance company will be quick to blame a leaky roof, collapsed block wall or other damage on the failure of the homeowner to perform necessary maintenance.
Myth 2: All homeowners claims are covered if a loss is caused by a national disaster.
It is important to carefully review the perils and exclusions in your policy because some losses caused by harsh weather and natural disasters are not automatically covered. While losses from hail, wind and lightning generally are covered under a basic homeowners policy, other perils like floods and landslides will not necessarily be covered. If you want coverage for flood damage, this type of coverage will be purchased as additional coverage provided by the federal flood insurance program.
Myth 3: The purchase price of your home should be used to establish the policy limits for your homeowners policy.
A home’s purchase price does not necessarily bear a close relationship to the cost to restore your home to pre-loss condition in the event of loss. The fair market value of a home is impacted by a range of factors that include the quality of the neighborhood, value of the land and aesthetic nature of the view. These items are not considered when valuing a homeowners claim because they have no connection to the cost to restore the home and personal property inside the home to its pre-loss condition. The policy limits of your homeowners policy should be based on the replacement value of your home not the market value.
Myth 4: Homeowners policies cover water damage.
While some forms of water damage are covered by homeowners policies, there are forms of water damage that are not included without paying an additional premium. If water damage is “sudden and accidental,” water loss typically should be covered. For example, a pipe or hot water heater might burst causing this type of sudden damage. By contrast, flooding will not be covered unless you purchase special flood insurance. Water damage caused by rain also generally will be excluded unless it penetrates the house because of wind damage that permits the water penetration.
My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.