Common Homeowners Insurance Myths Debunked

Homeowners insurance often flies under the radar—until disaster strikes. Whether it's a tree crashing through the roof, a burst pipe flooding your basement, or something worse, misconceptions about your policy can lead to costly surprises. Let's clear up some common myths, with a focus on the Santa Clarita area, to help you make informed decisions about protecting your home.

Myth #1: Homeowners Insurance Covers Everything

One of the biggest misconceptions is that homeowners insurance covers every type of damage or disaster. While many policies do provide broad protection, they come with exclusions. For example, standard policies typically don’t cover:

• Flood damage. Typically, homeowners must purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or private insurers.
• Earthquake damage. Coverage is usually available as an add-on or a separate policy, depending on the insurer.
• General wear and tear or maintenance issues. Insurance is designed for sudden and accidental damage, not for deterioration over time due to neglect or aging.
• Sewer backups. Standard policies generally do not cover sewer or drain backups, but many insurers offer a rider for additional protection.

Be sure to thoroughly read and understand your policy to know what's included and what's not.

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

Many homeowners assume their insurance should match what their home would sell for on the market. In reality, insurance is based on the cost to rebuild, not the home’s resale value. Market value includes factors like land and location, while replacement cost focuses on materials and labor to reconstruct the home as it was before the damage occurred. With fluctuating construction costs in Santa Clarita, it's crucial to regularly 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 does protect you if someone gets injured on your property, but there are exceptions. If the injury resulted from negligence—say, you ignored a rotting deck railing that finally gave way—you could still be sued for damages beyond your policy limits. Also, if you run a business from home and a client gets injured, your standard policy may not cover it.

Myth #4: My Policy Covers My Valuables Fully

Most policies have limits for expensive items like jewelry, artwork, and collectibles. While some protection is offered, it usually comes with per-item caps that may not match the value of your belongings. To ensure high-value belongings are fully covered, consider adding a scheduled personal property endorsement or rider.

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

With more people working remotely, many homeowners assume their standard insurance fully covers work-related equipment and activities—but this is a common misunderstanding. While a standard homeowners policy may offer limited coverage for business property, it often has restrictions on the value of work equipment it will reimburse and may not cover items owned by your employer at all.

Key Coverage Gaps:

• Limited coverage for work equipment. Your policy may only reimburse up to a certain amount and might not cover employer-owned equipment at all.
• No business liability protection. If a client, customer, or delivery person is injured on your property, you could be personally responsible.
• Business inventory may not be covered. If you store products or materials at home, your standard policy likely won’t protect against theft, fire, or other damage.

How to Stay Protected:

To make sure you’re fully covered in this scenario, you can consider the following options and decide which is right for you:

• Home-based business policy. Offers broader protection for business property and liability.
• Business property endorsement. Increases coverage limits for work-related equipment.
• Commercial liability coverage. Protects against lawsuits if someone is injured while visiting for business purposes.

If you work from home, check with your insurer to ensure you have the right coverage—before an unexpected loss occurs.

Myth #6: Homeowners Insurance Covers Mold and Termite Damage

Mold and pest damage are typically considered preventable maintenance issues, not sudden damage. If mold stems from a covered peril, like a burst pipe, your policy might help with remediation. Otherwise, mold due to neglected leaks or high humidity isn’t covered.

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

This is a surprise to many. Your insurance usually covers damage to your property regardless of where the tree came from. However, if your neighbor was clearly negligent, you might have a claim with their insurance or consider legal action.

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

This isn't necessarily true. Insurers factor in claims history, claim type, and location when adjusting rates. One small claim may not affect your premium significantly, but frequent claims can. Weigh repair costs against your deductible before filing.

Final Thoughts

Homeowners insurance is essential, but it’s not one-size-fits-all. Understanding your coverage can prevent expensive shocks. If you’re uncertain about your policy, talk to your insurance agent to ensure you have the right protection in place.

Have questions about homeowners insurance and how it might impact your real estate decisions in Santa Clarita? Let’s discuss.