homeowner myths Archives - SavingAdvice.com Blog

About 85 percent of homeowners have home insurance policies. On average, homeowners insurance costs around $1,083 per year in premiums, making it a substantial expense for many. Considering the price tag, it isn’t uncommon for property owners to assume that nearly every kind of event would be covered. However, that isn’t the case. Here’s a look at what most home insurance policies won’t cover.

Flood Damage

While the majority of homeowners insurance policies cover some forms of water damage, standard coverage won’t help you for floods. If you want flood coverage, you’ll need separate flood insurance.

Usually, homeowners go through the National Flood Insurance Program (NFIP) for flood policies. Those are overseen by the Federal Emergency Management Agency (FEMA) and can cover damage to the structure as well as personal belongings inside.

However, there are coverage amount limits of $250,000 for the structure and $100,000 for the contents of a home for basic flood insurance. If you need more than that, you’ll have to get “excess” coverage either from the NFIP or a private company.

Damage from Negligence

If your home is damaged, but that damage could have been prevented by properly maintaining the property. Your damages might not be covered. For example, if a pipe burst that should have been replaced years ago. Your claim might be denied. Similarly, if a storm tore a hole in your roof, but the roof was already in disrepair. Your claim might be denied or what is covered could be incredibly limited.

Often, damage caused by pests is also considered an issue of negligence. For example, if termites harm your home’s structure. Your policy probably won’t help.

Moving Earth

In many cases, damage caused by earth movement – like earthquakes, landslides, and sinkholes – isn’t covered by many policies. Like flooding, you’ll need a separate policy that covers that specific kind of damage if you want protection.

You’ll need to check your policy to see if earth movement is covered. If not, then you can get an earthquake policy through a private company to cover those kinds of events.

Backed Up Sewer Lines

If a sewer backup damages your home, most homeowners aren’t covered by their basic policies no matter the cause. For sewer backup coverage, you’ll either need a separate policy from a private company or a rider or endorsement on your existing policy.

Some Dog Attacks

Homeowners insurance often covers costs associated with someone being bitten by your dog. However, if you own certain breeds that are considered to be “aggressive” by your insurer. Your canine companion’s actions might not be covered.

For example, German Shepherds and Pit Bulls are frequently excluded from policies. Akitas, Chows, Staffordshire Terriers, Doberman Pinschers, Alaskan Malamutes, Siberian Huskies, Rottweilers, Great Danes, and Presa Canarios are often banned as well. Plus, nearly all wolf hybrids are eligible for coverage.

High-Value Jewelry, Antiques, Art, or Computers

While homeowners policies cover jewelry, furniture, art, and electronics in general. If yours have values beyond a certain cutoff point. Your coverage won’t handle the full value of the item. Instead, you’ll need to purchase a rider or endorsement to expand the amount.

The limit may vary from one insurer to the next. However, it is typically around the $1,000 to $2,000 mark for each item. For example, if you have a gaming computer worth $3,000, then you’ll probably need a rider. But, if you have three computers worth $1,000 each. You might not, depending on your insurer.

If you are concerned about coverage limits in those categories. You should contact your insurer. They can let you know what restrictions apply and whether you need a rider. Additionally, for antiques, art, and jewelry, your home insurance company can let you know if a formal appraisal is necessary if you want to expand your coverage.

Terrorism and War

Both acts of terrorism and war are uninsurable. If any kind of attack in those categories causes damage to your home, your insurer isn’t going to cover it.

Trampolines

While home insurance does cover a wide range of potential injuries. They won’t cover anything related to trampolines. These fun pieces of play equipment are incredibly dangerous and lead to a large number of injuries annually. This is why most insurers exclude them in their policies.

Have you ever tried to make a claim only to discover that your home insurance won’t cover it? Tell us about your experience in the comments below.

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Part of what has gotten the economy into such a mess is the belief that everyone should be a homeowner. Everyone from the government, to the mortgage brokers, to the banks, to the realtors and the homebuilders thinks that everyone in this country has the “right” and “duty” to own their own home. “It’s the American Dream!” they cry. While it’s true that property ownership is a right in the U.S., the truth that no one wants to put out there is that not everyone should or can afford to take advantage of that right.

Sure, owning a home is great, most of the time. Sometimes it stinks. I own a home and enjoy it. But I also didn’t mind living in an apartment. There are good and bad tradeoffs to both. When we made the decision to become homeowners, we put a lot of thought and research into the process and decided that it made sense for us. But it doesn’t make sense for everyone. Yet so many people were sold the myth that homeownership is the only way to go, and they were sold the myth that everyone can afford to own a home, that now the housing market is in the tank. Too many people bought homes that they couldn’t afford and, even worse, don’t even enjoy owning. Now they’re out a lot of money, time, and frustration. However, if they’d slowed down and thought about it for a minute, they might have concluded that, while home ownership is great for some, it just wasn’t for them. That would have saved a lot of heartache.

So how do you know if home ownership is right for you? Many pieces have been written about the benefits of home ownership and the investment potential. However, money isn’t everything and home ownership may be one investment you don’t want to make. There are other ways to invest your money. Here are some things that may signal you aren’t ready for home ownership. (Remember, every situation is different and only you know what is right for you.)

You have a variable income or you work in an industry where employment is iffy: Unless your variable income is very high, even in the slow periods, you may find it difficult to budget effectively for the mortgage, taxes, insurance, etc. that owning a home requires. Also, if you tend to be in and out of work a lot (your industry has a lot of unpaid furloughs, for example) it may be difficult to keep up with the monetary demands of a house.

You don’t have the time, skills, or inclination to handle even basic maintenance and repairs: Home repairs can be expensive. If you have to call someone for every little thing that goes wrong, it can be even more expensive. Handling things like lawn care, cleaning, and basic repairs on your own can reduce the costs to a manageable level. If you don’t have the time, desire, or know-how (and you don’t want to learn), home ownership might not be for you unless you have a ton of money to spend on these things.

You have no extra money to pay for repairs or improvements, taxes, insurance, HOA dues, or larger utility bills: Even if you save up for the down payment on the house and you can cover the closing costs and lawyer fees needed to get you into the house, you are nowhere near done laying out money. You’ll need to have enough available to pay all the other costs associated with home ownership. If buying the house wipes you out, you’ll have nothing left for everything else, leaving you very quickly with a house you cannot afford. Just making the mortgage payment isn’t enough.

You move a lot: If you tend to be nomadic, home ownership can be a pain. Just when you’re settled in, you have to deal with selling the house and buying another one. This can get old (and expensive) fast. Moving is costly and stressful enough without dealing with realtors, lawyers, and potential buyers. Nomads may do better with a housing option that they can move into and out of without much hassle.

You can’t afford to own in the area where you want to live: If you want to live on the “nice side of town” where the good schools and stores are, you’re likely to find that it’s costly to own a home there. Your budget may only allow you to own a home on the “bad side of town.” If this is the case, it may be to your advantage to rent in the better area.

You have only one person in the household who can earn an income: Notice I didn’t say only one person who IS earning an income. Many stay at home parents manage to own a home with only one spouse working. But this assumes that if the bottom falls out, the other spouse can go to work to cover the shortfall. If you have only one person in the house who is capable of earning an income (the other is disabled or you are a single parent, for example) keeping a house and a family on a single income might be challenging if you lose your job and it takes a while to find another.

You are financially irresponsible, generally: Home ownership requires a basic level of financial responsibility. You have to have the discipline to save up the down payment and then you have to make sure you always have enough to pay the mortgage each month, and the taxes and insurance which crop up at odd times. You also need to be able to save for repairs and maintenance costs. If you never know where your money goes and you are always living at the bottom of your checkbook, you might have problems owning a home.

You like a simple life: Owning a home complicates things. You spend your weekends doing yard work or maintenance. Your taxes go from the EZ form to the regular 1040 form so you can deduct your interest. When it’s time to sell, you have to deal with that whole mess. You find yourself waiting for repairmen at inconvenient times. Then there are the never ending “improvement” projects. It’s not a large burden, particularly if you enjoy your home. But if you’re the sort of person who just wants to write a check each month and let someone else sweat the details, then a home might not be for you.

You like the extra amenities that come with apartment life (and can’t afford to replicate that in your home): Many apartment complexes offer things like pools, hot tubs, clubhouses, and game rooms. You may not have the money to replicate this lifestyle in your new home. If you like these amenities, you’ll find them more affordable if you rent them.

You want to spend your money on other things: Home ownership is expensive, usually more so than renting by the time you factor in the maintenance, insurance, and tax costs. Maybe you want to do other things with your money like travel, donate heavily to causes you believe in, subsidize an aging parent, or blow it all on gaming systems. If home ownership is going to get in the way of other things you want to do with your money, you’ll only end up resenting your house. We all have our priorities of how we want to spend our money and if owning a home isn’t yours, then so be it. You should be happy with what your money does for you, not cussing at it every Saturday when you head out to mow the lawn.

You just don’t want to: If, for whatever reason, you just don’t want to own a home, don’t let anyone push you into it. I know many people who followed the Joneses and the advice of “investment pros” and gave into peer pressure to buy a home when they really didn’t want to. They all had different reasons for not wanting a house and no one reason was right or wrong. It was just their feeling, but they gave in and regretted it. Everyone makes the choices they feel are right for them so don’t let someone pressure you into something you don’t want to do.

If you choose not to own a house, there are several living options available besides basic apartment living.

You can buy a town home: These cost a lot less than a detached single family home. Very often, the developer/owner of the community takes care of the outside maintenance (you’ll probably pay dues for this) and you are only responsible for the interior maintenance. You still “own” something (and will have to pay taxes) but it is likely to be more affordable and easier to keep up than a traditional house. You might even get extras like a pool or clubhouse.

You can rent a house: Your landlord will probably be responsible for most of the maintenance and repairs (you may have to mow/maintain the yard), but you still get to enjoy a home with a yard and escape the property taxes.

You can buy a duplex and rent the other half: I have a friend who did this and it has worked out very well for her. She gets to “own” something, live in it at the same time, and collect rent to offset the mortgage.

You can live in a hotel/extended stay property: Don’t laugh, people do it and for some it works out wonderfully. It’s probably best for those without a lot of stuff or who move around frequently, but it might work.

You can own a condo: Similar to owning a town home, except the building is probably laid out like a traditional apartment building without as much exterior green space as you’ll find in a town home development.

You can move in with family or friends: Offer to pay rent, of course, and only if you can stand the people you’ll be living with (and they can stand you).

Buy a house as a group: If a group of friends or family members want to buy a house together, that lessens the costs/responsibilities for everyone. However, make sure these are people you trust and can live with, and have everything handled by a lawyer. That way, if someone decides to shirk their responsibilities or move out suddenly, you have legal back up. You’ll also need legal advice about how to set up the deed and what to do in the event the house needs to be sold.

Home ownership just isn’t for everyone, no matter what the government, media, and financial gurus might tell you. Some people are just happier and better off renting. And there’s nothing wrong with that choice. Some people are happy owning a home and will swear you absolutely, positively have to buy one, but it’s not your life they’re living. They’ll tell you that you’re throwing your life and money away if you don’t buy, but a home is not the Holy Grail of life. So before you buy, take some time and think about whether you really are the sort of person who should/wants to own a home, or are you only giving in to societal pressure that says you should. Then do what’s right for you.

What Does Your Home Insurance Not Cover?