4 Big Misconceptions about Home Insurance

BOSTON ( TheStreet) -- A recent poll shows few Americans know the ins and outs of homeowners' insurance -- even though misunderstandings can wipe you out if disaster strikes and you're not covered.

"Many consumers are purchasing insurance without really comprehending what they're buying," says Laura Adams of InsuranceQuotes.com, which found that less than half of people surveyed answered a series of questions correctly about homeowners' policies.

InsuranceQuotes.com commissioned Princeton Survey Research Associates International to poll 1,003 adults about what homeowners' insurance does and does not cover.

The result: For most questions asked, more than 50% of those surveyed either responded incorrectly, admitted they didn't know the answer or refused to reply at all.

Adams believes so few Americans understand homeowners' insurance because consumers often buy it "simply because they have to." After all, mortgage lenders require borrowers to carry policies until homeowners pay their loans off.

But Adams warns that property owners can lose everything if catastrophes not covered by people's policies strike.

"The danger is that you assume a particular disaster like an earthquake is covered -- but then it happens and you find out too late that you're not," she says.

Here's a look at four myths about homeowners' coverage that InsuranceQuotes.com found lots of Americans believe.

For each myth cited, the percentage of people who don't know it's false refers to how many poll respondents either gave the wrong answer, said they didn't know the correct information or declined to reply.

Myth No. 1: My policy won't cover a laptop or cellphone stolen from my car
Consumers who don't know that's false: 73%

Homeowners' insurance covers personal items snatched not just from your house, but also from your car, self-storage unit or other places -- something InsuranceQuotes.com found just 27% of those polled knew.

Some 28% thought no insurance covers those losses, while 34% believed incorrectly that auto policies protect you against such thefts. Another 11% either didn't know the answer to the question or refused to provide a response.

Myth No. 2: Homeowners' policies usually pay for mold damage
Consumers who don't know that's false: 55%

Adams says homeowners' insurance typically pays to eliminate mold only if your house develops problems because a storm or some other covered disaster opened the structure up to moisture.

If your place gets moldy simply because of a leaky pipe or hole in the roof, expect your carrier to refuse to pay -- saying you should have spotted the problem and fixed it.

Nevertheless, 41% of poll respondents thought homeowners insurance does cover mold issues, while 14% refused to answer or didn't know either way. Only 46% of those surveyed got the question right.

Myth No. 3: Standard homeowners' coverage protects you from earthquakes
Consumers who don't know that's false: 51%

You need separate earthquake insurance if you want to protect your house from temblors -- something just 48% of those polled knew.

Some 40% thought standard homeowners' policies do include such coverage, while 11% either declined to answer the question or admitted they didn't know either way.

Myth No. 4: Regular homeowners' insurance covers floods
Consumers who don't know that's false: 19%

Flooding can cause such extensive damage that not only do regular homeowners' policies fail to cover it, but insurers don't even offer optional coverage. Instead, consumers must buy special policies from the U.S. government's National Flood Insurance Program.

But even though Congress created the NFIP nearly a half-century years ago, 18% of people polled by InsuranceQuotes.com -- or nearly one in five -- still thought standard homeowners' policies cover flooding. Another 1% weren't sure of the correct information or refused to reply.

(Princeton Survey Research Associates International conducted its poll between April 4-7. The survey has a margin of error of plus or minus 3.7%, and some totals don't add up to 100% due to rounding.)