As a homeowner, it’s important to know what your insurance policy covers. If your insurance doesn’t cover you for something you thought it did, you could end up paying out of pocket for property damage or injuries.
Here are seven common myths about homeowners insurance coverage:
Myth #1. Anyone I hire to do work is covered under my homeowners insurance policy if he or she injured on my property while working.
False. In most states, your homeowners policy will cover a part-time worker (working less than 40 hours a week) who normally does not require workers compensation coverage if he or she is injured. That means a housekeeper, pet sitter, babysitter, or neighborhood kid who shovels your snow may be covered.
However, a plumber, roofer, landscaper, or other type of contractor may not be covered by your policy, as people working in these professions are typically required to have workers compensation coverage.
To ensure that your financial interest is protected, you may want to request a Certificate of Insurance naming you as additional insured before allowing a contractor to perform any work in your home. If you have live-in, full-time domestic help—such as a nanny or a caretaker for an elderly parent or disabled child—it is important to contact your agent to discuss whether purchasing your own workers compensation coverage is in your best interest.
Myth #2. The belongings my child takes away to college are completely covered under my homeowners policy.
False. Your child’s belongings are not all covered in every situation. It depends on the type of homeowners policy and riders you may or may not have, as well as the state in which you live. In addition, electronics such as computers or smartphones may need a rider or a simple maintenance contract to be covered in the event they are damaged or stolen.
Myth #3. I run a business out of my home and have no employees. Therefore, my homeowners policy will automatically cover any property or liability claims against me arising from my business operations.
False. Operating a business out of a home is very common today. Unfortunately, many home-based business owners do not even consider their insurance policies.
A standard homeowners policy typically does not include coverage for loss of income or for any business property such as office furniture, tools, computers, or inventory. And your homeowners policy certainly doesn’t cover any liability or defense costs arising from your business operations.
For example, if a delivery driver is bringing inventory to your home and trips, falls, and is seriously injured while walking into your home with the heavy boxes, your policy may not cover you. It’s also unlikely your homeowners policy will cover you if your product or service does damage to someone’s person or property.
With some in-home businesses, a rider can be added onto your homeowners policy to help protect you. In some instances, though, your business may need its own separate insurance policy.
Myth #4. I’m adding a 600 square foot extension to my home and will be staying in temporary housing and storing my belongings in a storage facility for the next six months. My homeowners policy will cover my existing home while I am out of the house.
False. In most states, a homeowners policy is designed to cover a residence that is regularly occupied by and furnished for the personal use of the named insureds and their resident relatives.
Once you change the occupancy, your insurance carrier may either non-renew your policy or deny a claim during the time of renovations. You will need a builder’s risk policy to cover you properly during this time. In addition, there may be limited coverage—or none at all—for you while you are renting a temporary location.
Myth #5. During a storm, my pool cover was torn off my in-ground pool and a tree fell and damaged all of my outdoor furniture. I have replacement cost coverage, so I will be fully reimbursed.
False. As many East Coast residents found out after Superstorm Sandy, wind damage to any outdoor furnishings, including a pool cover, is paid on an actual cash basis on most homeowners policies. That means these items are subject to depreciation regardless of whether you had replacement cost coverage or not.
Myth #6. My neighbor’s tree fell onto my fence during a heavy wind and rain storm. My neighbor’s homeowners policy will reimburse me for the damage.
False. Wind is an act of nature and no one can be liable for that. So, if your neighbor’s tree fell and damaged your property during a storm, your homeowners policy—not your neighbor’s—will trigger a claim to reimburse you for the damages (subject to your deductible, of course).
Myth #7. If I carry $1,000,000 liability on my homeowners policy, I do not need an umbrella policy.
False. Your liability coverage will protect you if someone trips and falls on your property; if your child accidently hits and injures a passer-by in the park while playing baseball with his friends; or if someone is seriously injured in your new pool, to name a few examples.
However, it will not cover you if you seriously injure someone while renting a car or boat while on vacation, nor will it cover the costs beyond those your automobile insurance covers in the event of an accident. In these instances, and others where claims could exceed the $1,000,000 amount, you may need an umbrella insurance policy, which kicks in when the limits on your other policies are reached.
Now that you know the truth about these common homeowners insurance myths, review your policy with your agent to ensure you have proper coverage and consider whether you need new or different policies that can help fill any gaps you may find.
Heidi Petschauer Fox graduated from St. John’s University in Queens, N.Y., in 1983 with a B.S. in management. She joined her late father’s firm, Petschauer Insurance, in 1982, became principal in 1995, and now shares ownership with her partner and cousin, Erwin Petschauer. She received her Certified Insurance Counselor (CIC) designation in 1997. She currently facilitates the professional and creative development of the entire Petschauer team and manages the personal lines and social media departments.