Nearly Half of Homeowners Don't Know What Their Insurance Policy Covers

Natural disasters caused $160 billion in damage in the United States in 2018. As a result, it's more important than ever for homeowners to understand whether they're financially protected in the event of a disaster.

While 85 percent of homeowners in the United States have home insurance, LowCostInsurance survey of 2,000 homeowners found that only half understand what their policies cover. Only 1 in 10 compared prices when shopping for coverage, and 34% believe their policies cover flooding, despite the fact that this is not usually the case. According to this study, many homeowners may be overpaying for insurance and being underinsured.

Another troubling finding is that less than 40% of homeowners have a home-monitoring system in place, such as a burglar alarm, fire alarm, or water sensor. Not only do these systems qualify homeowners for insurance discounts, but they are also financially risky if not installed. Fire and water damage are among the most expensive incidents for homeowners, accounting for more than one-third of all insurance claims.

18% of homeowners have never reviewed their insurance

According to our survey of homeowners, 47 percent are unsure of what their home insurance covers. This is unsurprising, given that one-third of these respondents also stated that they have never reviewed their policies. In comparison, 71% of homeowners who review their insurance coverage on an annual basis are confident in their understanding of which perils are covered.

Most homeowners do not shop around for insurance.

According to our research, homeowners are 78 percent more likely to choose their insurance policy based on a recommendation than they are to comparison shop, either by working with an independent insurance agent or by comparing quotes online.

• Used same provider as my auto insurance policy - 36%
• Recommendation from friends or family - 15.3%
• Mortgage lender's recommendation - 12.1%
• Worked with an independent insurance agent - 10.7%
• Compared insurance quotes online - 9.9%
• Recommendation from realtor - 9.3%
• Other - 6.8%

The cost of homeowners insurance can vary greatly between insurers. In Florida, for example, the average cost of a policy for nearly identical coverage varies by more than $1,500 between the cheapest and most expensive insurers. And the best-priced insurer will frequently change based on regional risks, the construction of your home, and whether you have other policies with the company, such as car insurance. As a result, we advise homeowners to always compare quotes using their own information before purchasing coverage.

Most homes don't have a monitoring system installed

More than 60% of homeowners do not have a home-monitoring system installed. And we were surprised to discover that whether or not a person feels safe in their home has no bearing on their likelihood of having a burglar alarm.

Central burglar alarms (59%) and central smoke/fire alarms (59%) were the most popular types of home-monitoring systems among homeowners (58 percent ). However, technologically advanced inventions are on the rise, with 53% owning a smart security or water-shutoff device.

Given that homeowners purchase monitoring systems primarily to protect their property and obtain lower insurance rates, it stands to reason that central alarms are the most commonly installed monitoring systems. These provide a direct link to local protective services in the event of a house fire or break-in, reducing response times and potential damage or losses. However, these systems tend to result in larger homeowners insurance discounts.

Why do people acquire home-monitoring systems?

Methodology

LendingTree's LowCostInsurance hired Qualtrics to conduct an online survey of 2,000 American homeowners, 1,849 of whom had homeowners insurance. The survey was conducted from March 22 to March 27, 2019.