Understanding Homeowners Insurance: Common Myths Explained

Introduction

Homeowners insurance often doesn't come to mind until there's a crisis, such as a tree falling on your roof or a burst pipe flooding your basement. By then, it’s usually too late to address any assumptions you had about your policy that might not be true. Let's clear up some common myths about homeowners insurance so you can make informed decisions about protecting your home in the San Diego Metropolitan Area.

Myth #1: Homeowners Insurance Covers Everything

One of the biggest misconceptions is that homeowners insurance covers all types of damage or disaster. While policies do offer broad protection, they come with exclusions. In San Diego, you should be aware that standard policies typically don’t cover:

• Flood damage. A separate flood insurance policy, either through the National Flood Insurance Program (NFIP) or private insurers, is usually required, especially given the unpredictable weather patterns we've seen in recent years.
• Earthquake damage. This coverage is available as an add-on or a separate policy. Considering San Diego's seismic activity, it’s wise to consider this additional protection.
• General wear and tear or maintenance issues. Insurance is meant for sudden and accidental damage, not deterioration over time due to neglect or aging.
• Sewer backups. Standard policies generally don’t cover sewer or drain backups. However, you can often add a rider for extra protection.

It’s crucial to read your policy and understand what’s covered—and what’s not—before you assume you’re fully protected.

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

Many homeowners think their insurance should match their home’s market value. 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 the materials and labor needed to reconstruct the home as it was. With construction costs fluctuating in San Diego, it’s essential to review your policy periodically to ensure adequate coverage.

Myth #3: If Someone Gets Hurt on My Property, It’s Always Covered

Liability coverage protects you if someone gets injured on your property, but there are exceptions. If the injury resulted from negligence—such as an ignored rotting deck railing—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. This is particularly relevant for San Diego homeowners given the growing trend of home-based businesses.

Myth #4: My Policy Covers My Valuables Fully

Most policies have coverage limits for valuable items like jewelry, artwork, collectibles, high-end electronics, and firearms. While your policy may offer some protection, it often comes with per-item or category caps. For valuable items exceeding these limits, consider a scheduled personal property endorsement to insure them for their full appraised value. Periodically review your policy, get appraisals, and keep an updated inventory to ensure adequate protection.

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 generally considered preventable maintenance issues, not sudden and accidental damage, which is why most policies don’t cover them. If mold results from a covered peril, such as water damage from a burst pipe, your policy may help pay for remediation. However, mold due to long-term humidity or leaks that weren't addressed will likely not be covered.

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

This one surprises many people. Typically, your insurance covers damage to your property, regardless of where the tree came from. If your neighbor was negligent, you might be able to file a claim with their insurance or take legal action. This can happen in densely populated areas of San Diego, where large, established trees are prevalent.

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

This isn’t necessarily true. Insurance companies consider many factors when adjusting rates, including your claims history, the type of claim, and your location. A single small claim may not impact your premium much, but frequent claims or high payouts could raise your rates. It's crucial to weigh the cost of repairs against your deductible before filing a claim.

Final Thoughts

Homeowners insurance is essential, but it’s not a one-size-fits-all policy. Understanding what's covered and what isn't can help you avoid costly surprises. If you’re unsure about your coverage, sit down with your insurance agent to review your policy and make sure you have the right protection in place. Have questions about homeowners insurance and how it affects your real estate decisions in San Diego? Let’s chat.