Debunking Common Homeowners Insurance Myths in Ann Arbor

Homeowners insurance is often overlooked until it’s urgently needed. By the time you’re dealing with a broken tree limb crashing through your roof, a burst pipe flooding your basement, or something even worse, it’s too late to revisit assumptions about your policy. Plenty of myths circulate about homeowners insurance, so let's clarify the facts to help you make informed decisions about protecting your Ann Arbor home.

Myth #1: Homeowners Insurance Covers Everything

One of the biggest misconceptions is that homeowners insurance covers every type of damage or disaster. Many policies offer broad protection, but come with exclusions. For example, standard policies typically don’t cover:

• Flood damage. Homeowners often need to purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or private insurers.
• Earthquake damage. Coverage is usually available as an add-on or separate policy, depending on your insurer.
• General wear and tear or maintenance issues. Insurance is designed for sudden and accidental damage, not for deterioration over time.
• Sewer backups. Standard policies generally do not cover sewer or drain backups, but many insurers offer extra coverage options.

It’s crucial to read your policy and understand what’s covered—and what’s not—before assuming you’re protected.

Myth #2: My Home is Insured for Its Market Value

Many homeowners assume their insurance should match the market value of their home. In reality, insurance is based on the cost to rebuild, not the home’s resale value. Market value includes factors like the land and location, while replacement cost focuses on materials and labor to reconstruct the house. With fluctuating construction costs in Ann Arbor, it’s essential to review your policy periodically to ensure you have adequate coverage.

Myth #3: If Someone Gets Hurt on My Property, It’s Always Covered

Liability coverage in a homeowners insurance policy protects you if someone gets injured on your property, but there are exceptions. If the injury resulted from negligence—like ignoring a rotting deck railing—you could still be sued for damages beyond your policy limits. Also, if you run a business from home and a client gets injured, your standard policy may not cover it.

Myth #4: My Policy Covers My Valuables Fully

Most policies have coverage limits for expensive items like jewelry, artwork, collectibles, high-end electronics, and firearms. While your policy might provide some protection, it often comes with per-item or category caps that may be lower than the actual value of your belongings. This means if a valuable item is lost, stolen, or damaged, your standard policy might only reimburse a fraction of its worth.

If you have high-value items that exceed these limits, consider a scheduled personal property endorsement or rider. This would specifically insure them for their full appraised value, providing broader protection. Periodically review your policy, get professional appraisals for valuables, and keep an updated inventory of your possessions.

Myth #5: I Don’t Need Additional Insurance Because I Work from Home

Many homeowners assume their standard insurance fully covers work-related equipment and activities—but that’s a common misunderstanding. While a homeowners policy may offer limited coverage for business property, it often has restrictions on the reimbursement value and may not cover items owned by your employer.

Key Coverage Gaps:

• Limited coverage for work equipment. Your policy may only reimburse up to a certain amount and might not cover employer-owned equipment at all.
• No business liability protection. If a client or delivery person is injured on your property, you could be personally responsible.
• Business inventory might not be covered. If you store products or materials at home, your standard policy likely won’t protect against theft, fire, or other damage.

To ensure you’re covered in this scenario, you can consider:

• Home-based business policy. This offers broader protection for business property and liability.
• Business property endorsement. Increases coverage limits for work-related equipment.
• Commercial liability coverage. Protects against lawsuits if someone is injured while visiting for business purposes.

If you work from home, check with your insurer to confirm that you have the right coverage—before an unexpected loss occurs.

Myth #6: Homeowners Insurance Covers Mold and Termite Damage

Mold and pest damage are typically considered preventable maintenance issues, not sudden and accidental damage. This is why most policies don’t cover them. If mold results from a covered peril—such as water damage from a burst pipe—your policy may help pay for remediation. However, if the mold is due to long-term humidity or unaddressed leaks, you’re probably on your own.

Myth #7: If My Neighbor’s Tree Falls on My House, They Pay for It

This one surprises a lot of people. Generally, your insurance covers damage to your property, regardless of where the tree came from. However, if your neighbor was negligent—like knowing the tree was dead and doing nothing about it—you might be able to file a claim with their insurance or take legal action.

Myth #8: Filing a Claim Always Leads to Higher Premiums

This isn’t necessarily true. Insurance companies consider many factors when adjusting rates, including your claims history, the type of claim, and your location. A single small claim may not impact your premium much—but frequent claims or a history of high payouts could raise your rates. It’s important to weigh the cost of repairs against your deductible before filing.

Final Thoughts

Homeowners insurance is an essential safeguard, but it’s not one-size-fits-all. Understanding what’s covered—and what isn’t—can help you avoid costly surprises down the road. If you’re unsure about your coverage, it’s a good idea to sit down with your insurance agent to review your policy and ensure you have the right protection.

Have questions about homeowners insurance and how it impacts your real estate decisions in Ann Arbor? Let’s chat.