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April 1, 2024

Home insurance is something that many people have and yet they may not know much about it. Ask your average homeowner what their insurance covers exactly, and very few would be able to tell you. There are a lot of misconceptions and myths about home insurance that people often believe without questioning.
In this blog, we are going to address what we think are five of the most common myths about home insurance.

Myth #1: Acts of God aren’t covered

You have probably heard someone say that your homeowner’s insurance does not cover “Acts of God” such as flooding, earthquakes, and lightning strikes. But the term “Acts of God” never actually appears anywhere in your policy.

Most policies do cover hazards such as hailstorms and lighting, while for other types of natural disasters such as earthquakes, you will only have coverage if you opt for a specific rider to cover them.
                  “There is no such coverage or exclusion wording specifically named “Act of God” in any policy I am aware of or have ever seen.  Policies are made up of Perils (cause of loss i.e. wind, fire, explosion, etc.) and Exclusions (War, Riot and Nuclear Disaster, etc). The term “Act of God” is never mentioned.” – Robert Zolumoff, President of ICD Insurance

Myth #2 – My rates will always go up if I make a claim

Some policies come equipped with a “claims forgiveness endorsement” at no additional cost to the customer, while others charge a small annual fee for this coverage. A claims forgiveness endorsement, when applied will see to it that your prices will not increase because of just one claim. Be sure to speak with your insurance advisor to confirm you have this valuable coverage.

Myth #3 – My insurance protects me against flooding

It depends on your policy, but in most cases, your standard home insurance policy will ONLY protect you from water damage that comes from inside your home – such as the case with a burst pipe or water heater.

Most policies however do NOT protect you from water that enters your home from either the sewer backup or overland water (aka flood). If you wish to have coverage against these events, you will most likely need to purchase an additional endorsement to your policy. In recent years, climate change has is responsible for a greater number of extreme weather events. As a result, sewer back-up and flood claims have become more frequent than ever. Make sure your policy is well equipped with adequate coverage. It is also important to remember that different insurance companies offer different limits and coverage. Your best bet is to deal with an insurance broker who has access to many insurers and can seek out the coverage you require.

Myth #4 – Home insurance covers the market value of my house

Home insurance only covers the cost of rebuilding or replacing your current home – not the market value of the house. For example, if your home were lost to fire, the cost of rebuilding could be less than the market value. That’s because the land is still there, and you do not need to repurchase or replace it.

Myth #5 – I don’t need to tell my home insurance company about embarking on a renovation

No matter the size, failure to notify your insurer of ANY home renovation could void your policy! If you are planning a renovation to your home, you’ve probably got a to-do list to keep you on track. Letting your insurance company know about those renovations should be near the top of that list! 

There are several reasons why it is important to let your insurance company know that you are making renovations.

For starters, some renovations will increase the rebuild value of your home and you may wish to increase the amount of home insurance that you have. Another reason is that your home is at a greater risk of having a loss occur while under renovation. Fire, collapse, and water damage are more than two times likely to occur in a home that is under renovation.

Most insurers will require you to collect certificates of insurance from your contractor. These certificates confirm that your contractor is insured and to what limit. These certificates are an important step to any renovation. 

Debunking these myths is a start to understanding your insurance policy. If you are in the market for a new insurance provider, or if you would like to understand what your current policy covers, contact one of our advisors today. We would be happy to help.