5 Homeowner’s Insurance Myths and Why You Should Debunk Them

As an insurance agent, one of the most important things to consider is to make sure your clients fully understand the terms and coverage limits before they purchase a policy. Among a few tricky insurance policies, it’s safe to say that a homeowner’s insurance policy is one of them.

Homeowner’s insurance can feel very complicated, and there are many home insurance myths your clients should consider. These rumors or myths can be very harmful to your clients financially. So, here are some myths regarding homeowner’s insurance and why you should debunk them to your clients.

1. Insure your home for its market value

The market value and insurable value for a house are two different things. Insuring your home for the replacement cost would be more prudent than for its market value. Insurable value calculates the amount required for the materials and contractors necessary to completely rebuild your home. Thus, the insurable value can be lower than that of the market value of your home.

2. Homeowner’s policy covers flood damage

There is a common misconception that homeowner’s policy covers flood damage. There are instances when your insurance covers water damage, but a flood is not one of them. Homeowner’s policy covers situations like sudden and accidental bursting of pipes. However, overland flooding, such as water swells from nearby rivers and lakes, are not included. You need to purchase a separate flood insurance policy if you want coverage from flood damage.

3. All valuables are covered

Homeowner’s policy covers your personal belongings and valuables. But there is a limit to it. These valuables may only have a small amount of coverage that may not fully cover them. A standard homeowner’s insurance policy includes minimal theft coverage for jewelry and other valuables. So, if you want full coverage for your valuables, you will need to add an endorsement called the personal articles floater.

4. Homeowner’s policy covers your home business

You must get the best home business insurance to provide coverage for your equipment and liabilities. A standard homeowner’s policy doesn’t offer coverage for a home-based business, however. An endorsement must be added, or a separate home-based business policy must be purchased for a home-based business. If you have a big home business, then you must consider having a business owner’s policy.

5. Termites, mold and other infestations are covered

Damages caused by termites, mold, and other infestations can be very destructive. But the sad part is that a standard homeowner’s policy does not cover them. These kinds of damages are considered by insurers to be maintenance issues. Thus, it’s your responsibility to take care of your home and use regular pest control services and termite inspections.

Why should you debunk them?

Insurance agents must keep their clients fully informed so that they can remain safely insured at all times. The above misconceptions regarding homeowner’s insurance are prevalent in the market. Your client might fall victim to one of these myths and may suffer financially due to it. If you, as an agent, weren’t able to pre-inform these misconceptions to the client, you might find yourself at the end of an E&O claim.

However, client relationships can affect the success or failure of a client’s claim against the agent. If an agent counsels the insured on policy terms or needed coverages, then it can be considered as having a “special relationship” with the client. Thus, the agent is liable for failing to explain a policy or exclusion to the client. Also, the agent is liable for failing to mention a policy that the client does not have at the time of the loss.

The insurance agent has to debunk these myths at the time of purchase to their clients. If the clients want coverage for the things not covered by the policy, the agent must inform them about the endorsements or the separate policy that they need to purchase to get such coverage.

Some guidelines to consider when a policy change request is made:

• You should follow up via email to reiterate the conversation even if the change request is made via telephone or other medium.
• Policy changes should be handled as quickly as possible, usually within 24 hours of your client’s change request.
• Confirm the change to your client and make sure to attach the new endorsement.