Consumers widely misunderstand home insurance, survey says
A Policygenius study reveals that widespread confusion may lead many Americans to be underinsured in their home insurance coverage.
Almost half of the homeowners in the U.S. do not adequately understand how to calculate home insurance coverage. As a result, many may be overpaying for coverage they don’t need or are unknowingly underinsured and leaving their property under-protected in case of a disaster, says a new study from Policygenius.
The “Home Insurance Literacy Survey,” which sampled 2,500 U.S. consumers age 25 and over from June 25 to July 3, 2020, also highlights glaring knowledge gaps in what home insurance does and does not cover. Consider that half of the respondents did not know that a typical homeowners insurance policy does not cover floods, and more than 80% did not know that a standard policy does not cover earthquakes.
The insurance policy misunderstandings outlined in the infographic could have severe financial consequences if a homeowner fails to secure proper coverage and lives in a high-risk area for natural disasters. It also illuminates the important role agents and brokers play in guiding homeowners through the insurance buying process.
“Home insurance is a protection created to give peace of mind, but our survey suggests that the process of getting coverage is difficult for many Americans to navigate,” Fabio Faschi, home insurance expert and property and casualty operations manager at Policygenius, said in a press release. “When more than a quarter of Americans think home insurance is much more expensive than it actually is, that misperception can make it hard for people to accurately budget for their needs.”
Other findings
The “Home Insurance Literacy Survey” unveils other areas of confusion amongst consumers regarding home insurance coverage, including:
- 49.4% of homeowners mistakenly believe that the amount of home insurance coverage they need should be based on their home’s market value.
- 76.1% of survey respondents said they didn’t know that they should notify their insurance company if they get a new dog.
- 48.7% of respondents said they didn’t know that a higher policy deductible can lower premiums.
- 41.5% of respondents were not aware of bundle discounts when purchasing home and auto insurance (or another type of coverage) from the same carrier.
- 26% of survey takers admitted to concerns that their current home insurance policy would leave them unprotected in the event of a disaster.
For more findings from Policygenius, access the full study here.
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