Think Your Home Is Covered? Mercury Insurance Points Out the Myths That Could Leave You Paying Out of Pocket

Why these homeowners insurance myths keep popping up — and why Mercury Insurance decided to clear the air

Homeowners insurance feels complicated, so myths spread fast. People assume the same words mean the same things from one company to the next. Old stories and social media posts make things worse.

Mercury Insurance recently published a roundup of common misconceptions. Their goal was simple: stop people from being surprised when a claim is denied or a bill lands in their mailbox. This article takes Mercury’s list as a starting point and explains, in plain language, what is true and what isn’t — and how those differences matter for your finances.

Five common homeowners insurance myths — and what really matters

Below are the myths Mercury flagged most often. For each, you’ll find the short truth and the practical coverage impact.

Myth 1: “My policy covers any water damage.”

Fact: Not all water damage is equal. Standard policies usually cover sudden, accidental damage (like a burst pipe). They often do not cover slow leaks, routine maintenance problems, or flood damage from rising water.

Why it matters: If your roof slowly leaks or your home floods during a storm, you may discover your claim is excluded. That can mean big repair bills unless you have specific add-ons or a separate flood policy.

Myth 2: “My homeowner’s policy will replace my house for the price I bought it for.”

Fact: Most policies promise to rebuild the home, not refund what you paid for the land or what the market value is. Replacement cost focuses on construction costs at the time of loss, not sale price.

Why it matters: If your coverage limit is too low, rebuilding after a major fire could leave you with a large gap to cover. Make sure the policy’s rebuilding estimate reflects current construction costs.

Myth 3: “All personal property is covered at full value.”

Fact: Personal property limits and how items are valued vary. Some policies pay actual cash value (replacement cost minus depreciation), unless you buy a higher option.

Why it matters: Jewelry, electronics, and art may need separate endorsements or scheduled coverage to get full replacement value.

Myth 4: “If my neighbor’s tree falls on my house, their homeowner’s policy will pay.”

Fact: Responsibility depends on how the tree fell. If a neighbor was negligent, their liability might apply. But if a storm caused it, your own policy usually handles your recovery.

Why it matters: Don’t assume a neighbor’s policy will cover your repairs. In many cases, you’ll first work through your own insurer and any dispute over fault may come later.

Myth 5: “Home insurance automatically covers all repairs after a claim.”

Fact: Insurers typically pay only for covered perils and up to policy limits. They may also require you to meet a deductible, and some items have sub-limits.

Why it matters: Expect some cost-sharing and limits. Read the fine print for dollar caps on categories like electronics or water backup coverage.

Myth 6: “I don’t need to update my policy after renovations.”

Fact: Upgrades change replacement costs and the value at risk. A remodeled kitchen or added square footage can require higher coverage.

Why it matters: Underinsured homes are expensive to fix. After a remodel, get your policy reviewed so limits match the new build cost.

Myth 7: “Small claims won’t affect my premiums.”

Fact: It depends on your insurer and the frequency of claims. Some companies raise rates after multiple claims; others offer accident forgiveness for first-time claims.

Why it matters: Weigh the cost of filing a small claim against paying out of pocket to avoid future premium increases.

Quick checklist to review your policy in 10 minutes

• Confirm whether water damage, flood, and sewer backup are covered or require separate policies or endorsements.
• Check if your dwelling limit is replacement cost or market value and whether it reflects recent building costs.
• Look for sub-limits on valuables; schedule high-value items if needed.
• Note your deductible and any clause that affects multiple claims.
• Tell your insurer about major renovations or new high-value purchases.

How these myths have real financial consequences

A family in California assumed their standard policy covered flood damage after a freak storm. They filed a claim and were told flood was excluded, leaving them to pay tens of thousands for repairs. In another case, a homeowner remodeled a basement but kept the same coverage limit; a fire later revealed they were significantly underinsured when rebuilding costs exceeded their policy limit.

Small misunderstandings about items like electronics or jewelry also add up. A denied claim for an expensive watch sent one policyholder into collections because the item wasn’t scheduled and was reimbursed at a depreciated value.

Where to go next: practical help and trusted resources

Start with Mercury Insurance’s guidance if it’s your carrier — they’ve published straightforward explanations of common pitfalls. Also check your state insurance department for consumer guides and complaint procedures. Consumer advocacy groups and independent insurance counselors can help explain dense policy language.

Finally, consider scheduling a short policy review with your agent to clarify limits, exclusions, and endorsements. A few minutes now can avoid a costly surprise later.