By Sabrina Karl
Although the vast majority of homeowners carry homeowners insurance (if you have a mortgage, it’s required), only about a fifth of homeowners have reviewed their policy to understand what it covers, or have shopped around for a good policy price.
A new ValuePenguin survey of 1,849 homeowners with homeowners insurance found that almost half (47 percent) said they don’t know what their policy covers, and 18 percent went as far as saying they have never reviewed their policy.
Meanwhile, although 64 percent reported they review their policy annually, only 71 percent said they feel confident in their understanding of what’s covered.
A common misconception turned up by the survey is the belief that flood damage is covered. One in three respondents (34 percent) believe their policies cover flooding, even though most policies do not. Among millennials, almost 50 percent have this misconception.
Many homeowners may also be paying more than they need to for coverage, since only a fraction are shopping around for the best rate. Approximately a fifth (21 percent) said they researched rates, either by comparing online quotes or working with an independent insurance agent.
So how are most homeowners choosing their homeowners insurance provider instead? More than a third (36 percent) simply opened a policy with their auto insurer, while another 36 percent chose who was recommended to them by friends or family (15 percent), their mortgage lender (12%), or their realtor (9%).
While homeowners insurance can seem like a simple checkbox to mark when you buy your home, and then keep current once a year, policies can range widely in terms of perils covered, deductibles required, and maximum payouts allowed, as well as rates charged. Doing your homework to choose the best coverage, and for the best price, is a savvy homeowner move.