Mercury Insurance Debunks Common Homeowners Insurance Myths

Debunking the Most Common Myths That May Mislead Consumers

LOS ANGELES, Dec. 10, 2025 — Homeowners insurance is riddled with misconceptions that can leave policyholders exposed to unexpected costs. While many assume that a standard policy offers blanket protection, the reality is far more nuanced, with specific limits, exclusions, and optional endorsements that must be understood to avoid costly gaps.

Mercury Insurance (NYSE: MCY) is using this opportunity to educate consumers and separate fact from fiction. “Many homeowners are surprised to learn that their policy doesn’t cover every situation,” said Bonnie Lee, Vice President of Property Claims. “A thorough review of policy language, limits, and exclusions is essential to ensure you have the coverage you truly need.”

Common Homeowners‑Insurance Myths

Myth 1: A homeowners policy covers everything.

A typical HO‑3 policy protects the dwelling and personal belongings only against specified, sudden, and accidental perils—fire, theft, wind, hail, and certain water damage (such as a burst pipe). Coverage is always subject to the policy’s limit, deductible, and a list of exclusions. Notably, flood damage, storm surge, and earthquake losses are generally excluded and require separate policies or endorsements. In high‑risk regions, insurers are increasingly using advanced geospatial analytics and climate‑modeling tools to price these supplemental coverages, reflecting the growing frequency of extreme weather events.

Renovations and high‑value upgrades also merit a policy review. Insurers often require homeowners to adjust coverage limits to reflect increased replacement costs, especially when smart‑home upgrades (e.g., integrated fire‑suppression or leak‑detection systems) are installed. These technologies can lower risk scores, leading to potential premium discounts, but they must be documented to avoid under‑insurance.

Myth 2: Home insurance is prohibitively expensive.

While premiums have risen due to inflation and climate‑related loss trends, the cost of being uninsured far outweighs the price of a well‑structured policy. Competitive shopping, bundling discounts, and leveraging loss‑prevention devices (smart thermostats, automatic shut‑off valves, etc.) can produce substantial savings. Mercury, for example, offers discounts for newer constructions, fire‑protective devices, and water‑leak detection systems. Moreover, insurers are deploying AI‑driven underwriting platforms that reward owners with lower risk profiles, further driving down costs for tech‑savvy households.

Myth 3: Only homeowners need insurance; renters are covered by the landlord’s policy.

Renters insurance remains underutilized, with less than half of U.S. renters carrying a policy despite its affordability. Landlord policies protect the structure, not a tenant’s personal belongings or liability. Without renters coverage, tenants face out‑of‑pocket expenses for stolen or damaged items and potential legal costs if a third party is injured on the rental property. Data from the Insurance Information Institute shows that renters who maintain a $30,000 personal liability limit and $10,000 property coverage experience up to 95% lower out‑of‑pocket loss severity in claims.

Myth 4: Policies cover pest infestations and mold.

Standard homeowners policies exclude damage caused by pests (rodents, raccoons, termites) and mold that develops from neglect or humidity. Coverage may apply only when mold results directly from a covered peril, such as a burst pipe. Insurers are now offering mold endorsements and pest‑control riders for an additional premium, often incorporating IoT sensors that monitor humidity and detect early signs of water intrusion, reducing the likelihood of mold formation.

Myth 5: Home‑based businesses are automatically covered.

Most personal homeowners policies exclude business activities. Home entrepreneurs should consider a home‑business endorsement or a separate commercial policy to protect equipment, inventory, and liability arising from client visits. InsurTech platforms now provide streamlined quoting engines that assess the nature of the business, revenue exposure, and cyber‑risk, offering tailored coverage bundles that can be added to existing homeowners policies.

Business and Technology Trends Shaping Homeowners Insurance

1. Climate‑Risk Modeling: Insurers are integrating high‑resolution climate data and catastrophe modeling to predict flood, wildfire, and wind‑storm exposure. This enables more accurate pricing and incentivizes mitigation measures, such as elevating structures in flood‑prone zones.

2. Digital Underwriting and AI: Machine‑learning algorithms analyze property data, claim histories, and real‑time sensor inputs to refine risk scores. Homeowners with smart‑home devices that can automatically shut off water or detect smoke often receive lower premiums, reflecting reduced loss probability.

3. Embedded Insurance: Partnerships between real‑estate platforms and insurers are embedding coverage options directly into the home‑buying process, allowing buyers to purchase tailored policies at closing.

4. Policy‑Administration Platforms: Cloud‑based systems streamline endorsements, claims filing, and policy adjustments, delivering faster response times and improving customer satisfaction scores.

5. Regulatory Landscape: State regulators are pushing for greater transparency around exclusion clauses and mandatory disclosure of coverage limits, benefitting consumers who demand clearer policy language.

About Mercury Insurance

Mercury Insurance (NYSE: MCY) is a multi‑line carrier that offers personal auto, homeowners, renters, and commercial insurance through a network of independent agents across Arizona, California, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas, and Virginia, with auto coverage also available in Florida. The company writes a variety of specialty lines, including landlord, home‑sharing, ride‑hailing, and mechanical‑protection insurance. Founded in 1962, Mercury serves customers in 11 states, employing more than 4,200 staff and partnering with over 6,300 independent agents. The carrier holds an “A” rating from A.M. Best and has been recognized as a top auto insurer by industry publications.