3 Homeowners Insurance Myths You Can't Afford to Believe

Don't believe any of these misconceptions.

If you're financing a home purchase with a mortgage, you should know that your lender will require you to purchase homeowners insurance. But even if you're buying a home in cash or own your home outright, homeowners insurance is still an essential thing to have. Without homeowners insurance, you could get stuck with a host of devastating bills in the event that your property is damaged.

That said, there's a lot of incorrect information out there regarding homeowners insurance. So whether you're buying a policy for the first time or have had one for years, here are some big homeowners insurance myths you shouldn't let yourself buy into.

1. Homeowners insurance will cover any repair you need

You might assume that any little thing that goes wrong with your home will be covered by your homeowners insurance policy. But actually, that's not how homeowners insurance works.

The purpose of homeowners insurance is to protect you from unanticipated damage. But homeowners insurance won't cover the cost of issues that arise due to wear and tear.

So, let's say your roof is damaged in a windstorm. That's the sort of repair that may be eligible for coverage. But let's say your heating or air conditioning system stops working after a number of years. That's something that just tends to happen over time, so you shouldn't expect your homeowners insurance policy to pick up the tab for a new one.

In fact, you'll often hear that it's important to maintain a solid emergency fund as a homeowner to cover home repairs. A big reason is that your homeowners insurance policy may not cover as many issues as you'd think.

2. Your homeowners policy will fully protect you in the event of theft

Homeowners insurance policies generally have a theft coverage component. But there may be a limit as to how much your policy will pay on a per-item basis.

Let's imagine you own a lot of expensive artwork. Your policy might have a limit of $1,000 per piece that's stolen or destroyed. If you have a piece of art worth $5,000, you could end up being out $4,000 if someone breaks into your home and walks away with it.

That's why it's so important to understand your coverage limits under your policy. In some cases, it could make sure to buy extra insurance for items that fall outside the scope of your policy's standard reimbursement.

3. It's best to stick with the same homeowners insurance company for life

You might assume that if you've used the same homeowners insurance company for years, that keeping your coverage with it will result in the lowest premium costs. But that's not automatically true.

Homeowners insurance companies don't always reward policy holders for being loyal customers. And if your premium rates keep rising, it pays to shop around with different homeowners insurance companies and see if there's a better deal out there.

Homeowners insurance is a necessary expense -- and it's one you should thoroughly understand. So the next time you come across these myths, don't believe them.