Lancaster County Association of REALTORS®

Property insurance is one of those things most people don’t think much about—until they need it. And when a claim happens, the last thing you want is to discover that your policy doesn’t work the way you thought it did. After years of helping homeowners understand their coverage, these are 10 of the biggest misconceptions I see. 1. Your home’s market value is NOT the same as its replacement cost. If you bought your home for $400,000, that doesn’t necessarily mean it should be insured for $400,000. Your home’s replacement cost is based on what it would cost to rebuild the structure with today’s labor and material costs—not what you could sell the property for. Your purchase price also includes things like the land and location. 2. Flood damage usually isn’t covered by homeowners insurance. This is a BIG one. A standard homeowners policy generally does not cover flooding from rising or overflowing water. Flood insurance is typically a separate policy. And no—you don’t necessarily have to live in a high-risk flood zone to experience a flood. 3. Homeowners insurance isn’t a home warranty. Insurance is designed for sudden and accidental losses, not everything that breaks in your house. If your 20-year-old water heater simply reaches the end of its life and stops working, homeowners insurance generally isn’t going to buy you a new one. If that water heater suddenly bursts and causes covered water damage, however, the resulting damage may be a different story. 4. Your deductible is what YOU agree to pay toward a covered claim. If you have a $2,500 deductible and experience a covered $10,000 loss, you shouldn’t expect the insurance company to simply hand you $10,000. Understanding your deductible before you have a claim is incredibly important. Choose an amount that helps with your premium but that you could also realistically afford if something happened tomorrow. 5. Not all water damage is treated the same. “I have water damage” doesn’t automatically tell us whether something is covered. A sudden pipe burst, water backing up through a drain, groundwater entering a basement, and a slow leak that has been happening for months can all be treated differently. Where the water came from and how the damage happened matter. 6. Your belongings have limits, too. Your policy may include personal property coverage for things like furniture, clothing and electronics, but certain categories of property can have special limits. Jewelry, watches, collectibles, firearms, fine art and other high-value belongings may need additional coverage or to be specifically scheduled on the policy. If you own something valuable, tell your insurance agent about it before something happens to it. 7. “Full coverage” isn’t really an insurance coverage. People use the phrase “full coverage” all the time, but there is no magical policy that covers absolutely everything. Every insurance policy has coverage limits, exclusions, deductibles and conditions. The goal isn’t to find a policy that covers every possible scenario to understand what protection you actually have. 8. Your insurance company needs to know about major changes to your home. Finished your basement? Added a pool? Built an addition? Started renting the property? Made significant renovations? Those are things you should discuss with your insurance agent. Your policy was written based on certain information about your home and how it is being used. When that changes, your insurance may need to change with it. 9. The cheapest homeowners policy isn’t always the best deal. Saving money is important, I get it! But two policies with similar premiums can provide very different protection. Before choosing a policy based solely on price, compare things like: Dwelling coverage, Deductibles, Liability limits, Personal property coverage, Water backup coverage, Replacement cost provisions, and Additional endorsements and exclusions. Saving a few hundred dollars a year may not feel like a bargain if you discover a major coverage difference after a loss. 10. The BEST time to understand your policy is before you have a claim. Please don’t wait until there’s water in your basement, a tree on your roof or a fire in your kitchen to learn what your policy covers. Ask questions. Review your coverage. Tell your agent when something changes. Insurance can feel complicated, but that’s exactly why having an agent you trust matters.

Learn how non-mortgage contingent offers differ from cash offers and what buyers and REALTORS® should know about financing, appraisals, and contract risks.