Home Insurance Myths
Most homeowners walk into insurance with the wrong expectations. They assume the policy covers everything, pays quickly, and protects them from any kind of disaster. That’s not how insurance works. Insurers make money when you misunderstand your coverage—and lose money when you know better. This guide cuts through the myths that lead to denied claims and painful surprises.
If you want the full picture of what’s covered and what isn’t, skim coverage explained first. A lot of these myths come from misunderstanding the basics.
Myth 1: “My Home Is Covered for Any Disaster”
No. Standard policies exclude entire categories of losses—some of the most expensive ones.
- Flooding → NOT covered
- Earth movement (earthquakes, sinkholes) → NOT covered
- Sewer backup → NOT covered unless added
- Wear and tear → NEVER covered
If you haven’t reviewed exclusions before, read exclusions explained. It’s the section homeowners skip and regret later.
Myth 2: “I’ll Get the Full Cost to Replace My Stuff”
Only if you have Replacement Cost (RCV) coverage. Many homeowners unknowingly have ACV (Actual Cash Value), which deducts depreciation.
- Old TV? Big depreciation hit
- Used furniture? Low payout
- Outdated appliances? Pennies on the dollar
If you don’t know what your policy uses, review ACV vs RCV immediately.
Myth 3: “My Home-Based Business Items Are Covered”
Wrong. Business property coverage is tiny on homeowners policies—usually $2,500 inside the home and $500 in your car.
If you run anything from home—Etsy shop, lawn service, tutoring—read home business basics. You’re probably uninsured.
Myth 4: “Insurance Will Pay for Maintenance Problems”
Insurers won’t touch damage caused by neglect or deferred maintenance.
- Old roofs leaking due to age → denied
- Rust-eaten pipes bursting → denied
- Rotting wood leading to water entry → denied
Claims only apply to sudden, accidental events—not long-term deterioration.
Myth 5: “I Should File a Claim for Every Loss”
This is one of the most expensive myths. Filing small claims destroys your claims-free discount and spikes premiums for years.
- Small claims often cost more in premium increases than the payout
- Multiple claims can trigger non-renewal
- Water claims are especially damaging
Before filing anything minor, read claim impact.
Myth 6: “If My House Burns Down, Insurance Covers All Living Costs”
Loss of Use (ALE) coverage isn’t unlimited. It comes with caps and time limits.
- Hotel stays
- Temporary rentals
- Food cost increases
Check your ALE limits under loss of use basics. Many families burn through this faster than expected.
Myth 7: “My Insurance Company Will Guide Me Through It All”
Adjusters don’t work for you. They work for the insurer. Their job is to settle the claim as cheaply as possible while staying within policy rules.
- They may overlook damage unless you point it out
- They won’t explain optional coverages
- They rarely volunteer payout-increasing information
If you want to know how adjusters actually operate, see adjuster basics.
Myth 8: “My Policy Never Changes Unless I Change It”
Insurers modify coverage at renewal all the time—often quietly.
- Higher deductibles
- New exclusions
- Roof coverage downgraded to ACV
Renewal season is when insurers slip in the most changes. Always compare the new declarations page to the old one.
Myth 9: “Everything in My House Is Automatically Covered”
High-value items have sub-limits unless they’re scheduled.
- Jewelry
- Firearms
- Artwork
- Collectibles
If you own anything expensive, review scheduling valuables.