Two-thirds of insureds don’t know what their homeowners’ policy covers – survey

New data reveals opportunities for the insurance industry to better educate consumers

Two-thirds of insureds don’t know what their homeowners’ policy covers – survey

Insurance News

By Gia Snape

Homeowners face more decisions than ever when it comes to purchasing home insurance. Amid increasing rates, complex insurance processes, and a looming threat of natural disasters, US homeowners can greatly benefit from more education, guidance, and support when it comes to securing the right coverage for their most important asset.

A new survey by Goosehead Insurance reveals that two-thirds (65%) of Americans “have no idea” what their home insurance policy fully covers. Nearly half (45%) also said they’ve had an insurance claim denied because they didn’t have the coverage.

Goosehead’s “Homeowners Insurance Preparedness Report” reveals a stark gap in insureds’ knowledge about their policies, which independent agents are well-positioned to remedy. Conducted by OnePoll between June 22 and June 29, 2022, the survey polled more than 2,000 US homeowners.

“Our findings drive home the point that the insurance process is overwhelming and extremely difficult to navigate for most American homeowners,” said Brian Pattillo (pictured), vice president of strategy at Goosehead Insurance, a Texas-based independent personal lines agency.

A majority (76%) of US homeowners in the survey said they found the home insurance selection process stressful. Only one in four (27%) shop around for the policy that covers everything they need, and one in five (20%) compared more than five policies before picking the best option, revealing a missed opportunity for homeowners to receive the right coverage at the best price.

The survey also showed a disconnect between what insureds believe is covered by a home insurance policy and what is actually covered:

  • Thirty-two percent think flooding from a storm is covered by their home insurance policy;
  • Twenty-nine percent believe problems with the home’s foundation are covered; and
  • Twenty-seven percent believe termite damage is covered.

About seven in 10 Americans admitted they don’t understand common insurance terms like limit of liability, actual cash value, and identity theft fraud expense protection.

What factors are driving the way consumers shop for home insurance?

According to the Goosehead report, increasing natural disasters and inflation are the most significant factors driving the way US homeowners shop for insurance.

Over half (53%) of homeowners said they lived in a disaster-prone area, but less than half (48%) feel prepared for the worst when it comes to their home insurance. Sixty-six percent of people surveyed said they would pay more to protect their home from natural disasters.

But at the same time, inflation is causing homeowners to choose less coverage to cut costs. Over half of homeowners (57%) would sacrifice policy coverage in their home insurance policy to save money because of rising rates.

What can independent agents do for home insurance customers?  

For Pattillo, the findings show a clear opportunity for independent agents to provide education and support to homeowners, and create a more simple, transparent, and efficient selection process.

“Amid rising rates, extreme weather patterns, and a volatile market, it’s clear that consumers need an easier way to both understand and navigate an often-complex insurance process,” Pattillo told Insurance Business.

An independent agent has a clear advantage in taking on this role. A key to getting the right coverage and price fit is supplying home insurance customers with variety of quotes from different carriers – something independent agents are well-positioned to do.

“Customers are looking to feel supported when choosing their home insurance, and still prioritize professional support to guide their decision-making,” Pattillo said. “This presents an invaluable opportunity for agents to earn the trust and confidence of their customers by providing them with the knowledge, insights, and information they need to choose the right insurance.”

Goosehead Insurance offers a digital agent platform that allows customers to connect with agents and receive quotes on home insurance, car insurance, and other personal lines. Despite the increasing popularity of direct-to-consumer platforms, Pattillo said independent agents play a key role in putting insurance information into context for homeowners and giving them an overall perspective of the market.

“Combining a tech-driven tool with the knowledge and expertise of an agent can provide consumers with the best options on the market, while also educating consumers throughout the process,” he explained. “While tech-driven self-service insurance platforms provide a straightforward and efficient way for consumers to shop for insurance, agents need to remain central to the process.”

What more should independent agents do to educate homeowners on their insurance policies? Share your suggestions in the comments below.

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