Debunking Top Myths about Home Insurance

The way you think about homeowner insurance could be costing you a lot of money or security.

A lot of people do not take the time to understand the basics and end up either buying too much or too little. They focus solely on the premium or on the benefits, without really understanding the real reason for homeowner insurance in the first place. The details can seem confusing, and it is easy to get misled by looking at the wrong facts or putting them in the wrong context. In the Hudson Valley, insurance is as misunderstood as it is elsewhere.

Let’s debunk a few of the most common myths so that you can make a common sense plan for insuring your most valuable asset—your home—and your financial future at the same time.

1. When I buy insurance, I should receive financial benefits equal to the premiums I pay.

I hear people complain that they put a lot of money into their home or other insurance, “and what have I got to show for it?” What you have is peace of mind. A homeowner policy is not like a health insurance policy where you regularly make claim for payment. What you are doing is making sure that if your home should ever burn down or otherwise suffer major damage, you and your family will not lose everything, particularly if you have not paid off your mortgage. (How much you are reimbursed will depend on your coverage.)

You should buy homeowner insurance hoping that you will never need it, and sleep better knowing that it is there. You don’t need insurance to replace a broken window, the way you need health insurance to pay for a broken arm.

2. I don’t need insurance for disasters such as floods or windstorms or earthquakes because the federal government will take care of me.

Okay, chances are low that these things are going to happen to you, but they do happen. And if disaster should strike, don’t count on free money from the government to bail you out for failure to plan. When government aid is offered, it is usually in the form of low-cost loans. Make sure your policy covers you—it costs less than you think to have this kind of mental security. Again, the principle here is protecting yourself from catastrophe.

3. I should buy insurance based on the value of my home.

It’s a good idea to calculate what kind of insurance you would need to replace your home. But if the only thing you insure is the actual physical structure, you could still lose your home trying to pay off a liability claim. What if a neighbor slips on an icy patch on your sidewalk and is permanently paralyzed? What if she sues you? These things happen! You could be paying her medical bills for the rest of your life just because you decided to trim your premiums by a few dollars a month.

Consider getting liability coverage at least equal to your net worth. If you want to save money, don’t cut liability insurance! Ask your agent about insurance discounts. By paying attention here, you can end up with a more comprehensive plan for probably less than you are paying now.

Talk to friendly local insurance professionals about Newburgh insurance rates to get straight talk about how to protect your home and your future.

Mold, Fire, Flood & Other Topics: Homeowners Insurance Explained