Buying your first home is an exciting milestone, but it comes with its fair share of responsibilities, including purchasing homeowner’s insurance. This vital coverage protects your new investment, offering financial security against unexpected damages or losses.

However, if you’re new to the process, you might feel overwhelmed by conflicting information about what homeowner’s insurance does or doesn’t do. Misunderstanding these details could leave you underinsured or overpaying for coverage you don’t need.

Myth #1: Homeowner’s Insurance Covers Everything

One of the most persistent myths is that homeowner’s insurance offers blanket protection for all possible scenarios. While these policies cover a lot, they aren’t a catch-all solution. A standard policy generally protects against perils like fire, theft, vandalism, and certain weather events (e.g., wind or hail), but it has its limits.

Most policies don’t automatically include coverage for flood or earthquake damage. If you live in an area prone to these natural disasters, you’ll need to purchase separate policies or endorsements to ensure coverage. Additionally, routine wear and tear, maintenance issues, or intentional damage are excluded from coverage. Think of it this way: insurance isn’t designed to cover things you might have prevented through regular upkeep.

Review your policy carefully and ask your provider about additional coverage options tailored to your needs. It’s always better to ask upfront than to face costly surprises after a claim.

Myth #2: Homeowner’s Insurance Is Too Expensive

Many first-time buyers assume they can’t afford homeowners’ insurance, but the reality is that it’s often more affordable than people think. While costs vary based on factors like the size of your home and your location, the average annual premium in the U.S. is approximately $1,300. When you break that down, it’s about $100 per month—not exactly budget-busting for the peace of mind it provides.

What’s more, there are plenty of ways to save on premiums. For instance, you can:

  • Bundle policies: Many insurers offer discounts if you combine your homeowner’s and auto insurance.
  • Improve security: Installing a home security system, smoke detectors, or deadbolt locks can make you eligible for discounts.
  • Raise your deductible: Opting for a slightly higher deductible (the amount you pay out of pocket before insurance kicks in) can lower your monthly premium.
  • Shop around: Not all insurance providers are priced the same, so compare quotes to find the best balance of price and coverage.

Focus on balancing cost with coverage. The cheapest plan isn’t always the best choice if it leaves you vulnerable in critical areas.

Myth #3: Flood Damage Is Always Included

One of the most dangerous assumptions you can make is believing that flood damage is included in your regular homeowner’s insurance policy. Unfortunately, floods are one of the most common natural disasters, and standard insurance usually won’t cover the damage they leave behind.

If your home is in a flood-prone area, you’ll need to purchase separate flood insurance, typically through the National Flood Insurance Program (NFIP) or private insurers. Even if you don’t live in a high-risk area, flooding can happen due to heavy rains, broken dams, or even clogged drainage systems. A single inch of water in your home can cause tens of thousands of dollars in damage, making flood insurance worth considering.

Use FEMA’s Flood Map Service to assess your home’s flood risk. Even low-risk areas aren’t immune to flooding, so weigh the potential cost of damage against the price of flood insurance.

Myth #4: Homeowner’s Insurance Covers All Personal Belongings at Full Value

While your policy does cover personal belongings, it may not be as comprehensive as you think. Most homeowner’s policies place limits on high-value items like jewelry, electronics, or collectibles. For example, there might be a $2,500 cap on coverage for electronics, which may not be enough to replace multiple laptops, TVs, or gaming systems if they’re stolen or destroyed.

Additionally, your items are typically covered for their actual cash value, which factors in depreciation. This means you’ll be reimbursed for what the item is worth today, not what you paid for it originally. To ensure greater protection, you can add “replacement cost” coverage for personal belongings or purchase riders for specific high-value items.

Take an inventory of your belongings and determine if your policy’s limits meet your needs. For items like engagement rings or musical instruments, discuss scheduling them separately for full protection.

Myth #5: Older Homes Are Uninsurable

If you’ve fallen in love with a charming older home, you may worry that insuring it will be impossible. While insuring older properties can sometimes be trickier, it’s far from impossible. Insurers may charge higher premiums for homes with outdated plumbing, electrical systems, or roofs, but that doesn’t mean you're out of options.

Updating these systems can make your home safer and lower your premiums. Some insurance providers even specialize in covering older or historical homes, so it’s worth exploring providers specifically tailored to your situation.

Before buying an older home, get a professional inspection to identify potential issues. Factor those repair costs into your budget, as they may directly impact your ability to secure affordable insurance.

Myth #6: Small Claims Won’t Affect My Policy

Another misconception is that filing small claims won’t have much impact on your policy. However, making frequent claims, even for minor issues, can lead to higher premiums or even policy nonrenewal. Insurers view a history of claims as an indication of higher risk, even if those claims were relatively small.

To avoid this, only file claims for significant damages that you cannot reasonably pay out of pocket. Consider setting aside an emergency fund for smaller issues like minor repairs.

Consult your insurance agent before filing a claim to understand how it might affect your premiums. Sometimes, it’s cheaper in the long run to pay out of pocket for minor fixes.

Myth #7: You Don’t Need Insurance Once You Pay Off Your Mortgage

Some homeowners mistakenly believe that once their mortgage is paid off, they no longer need insurance. While it’s true that homeowners insurance is required by lenders to protect their investment, dropping coverage once you own the home outright is a risky move.

Without insurance, you’d be financially responsible for all repairs, rebuilding costs, and liability claims. For example, if a fire destroys your home or someone gets injured on your property, you’d have to cover the expenses entirely on your own. Homeowner’s insurance is just as important when your home is fully paid off as it is when it’s mortgaged.

Treat homeowner’s insurance as a non-negotiable. It’s about protecting your financial future, not just satisfying lender requirements. By debunking these misconceptions, you’re better prepared to choose a policy that works for you and your new home.