Debunking Common Homeowners Insurance Myths in Ann Arbor

Homeowners insurance is one of those things people don’t think about until they need it. Unfortunately, by the time you’re dealing with a crisis—a tree crashing through the roof, a burst pipe flooding your basement, or worse—it’s too late to address anything you assumed about your policy that might not be true. There are plenty of myths floating around about homeowners insurance, so let’s set the record straight so you can make informed decisions about your home’s protection.

Myth #1: Homeowners Insurance Covers Everything

One of the biggest misconceptions is that homeowners insurance covers every type of damage or disaster. While many policies do provide broad protection, they come with exclusions. For example, standard policies typically don’t cover flood damage. Here in the Ann Arbor area, if you live in areas prone to flooding like parts of Dexter or along the Huron River, consider purchasing a separate flood insurance policy through the National Flood Insurance Program (NFIP) or private insurers. Earthquake damage, general wear and tear, and sewer backups generally require additional coverage or riders.

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

Many homeowners assume their insurance should match what their home would sell for on the market. In reality, insurance is based on the cost to rebuild, not the home’s resale value. For instance, in Ann Arbor's older neighborhoods like Water Hill or Burns Park, market value includes factors like land and location, while replacement cost focuses on materials and labor to reconstruct the home as it was before the damage occurred. With fluctuating construction costs, it’s essential to review your policy periodically to ensure you have enough coverage.

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

Liability coverage in a homeowners insurance policy does protect you if someone gets injured on your property, but there are exceptions. If the injury resulted from negligence—such as ignoring a rotting deck railing at a property in neighborhoods like Old West Side or Kerrytown that finally gave way—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 homeowners policies have coverage limits for expensive items like jewelry, artwork, collectibles, high-end electronics, and firearms. If you own high-value items that exceed these limits, you can add a scheduled personal property endorsement or rider to specifically insure them for their full appraised value. Whether you live in a historic home by the Nichols Arboretum or a modern condo downtown, it's wise to periodically review your policy, get professional appraisals for valuable items, and keep an updated inventory of your possessions.

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

With more people working remotely in places like Ann Arbor and Ypsilanti, many homeowners assume their standard insurance fully covers work-related equipment and activities—but this is a common misunderstanding. Your policy may have restrictions on the value of work equipment it will reimburse and might not cover items owned by your employer at all. To stay protected, consider options like a home-based business policy, business property endorsement, or commercial liability coverage.

Myth #6: Homeowners Insurance Covers Mold and Termite Damage

Mold and pest damage are generally considered preventable maintenance issues, not sudden and accidental damage, which 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. But regular home maintenance is crucial to avoid such issues, whether you live in the newer developments of Pittsfield Township or a 1930s colonial in west Ann Arbor.

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

This one surprises a lot of people. In most cases, your insurance covers damage to your property, regardless of where the tree came from. However, if your neighbor was negligent—like if they knew the tree was dead and did 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.

Final Thoughts

Homeowners insurance is an essential safeguard, but it’s not a one-size-fits-all policy. Understanding what’s covered—and what isn’t—can help you avoid costly surprises down the road. If you're unsure about your coverage, you should sit down with your insurance agent to review your policy and ensure you have the right protection in place. Have questions about homeowners insurance and how it affects your real estate decisions in the Ann Arbor area? Let’s chat.