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Common Misconceptions with Homeowner’s Insurance
Do you know what your homeowner’s insurance covers? A survey reveals the confusion and answers over home insurance basics.


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If the walls shatter around you, do you know what coverage you have?


Are two heads better than one? Despite the common belief that married couples are more financially knowledgeable than the average single person when it comes to insurance, the MetLife Auto & Home Insurance Literacy survey, conducted by Zogby International, reveals this might not be the case after all.

In fact, when asked specific questions about home insurance, on average, married couples only scored just a few points better than their single counterparts, which is not statistically significant. In fact, some of the questions asked in the survey revealed that married couples are just as in need of a brush up on home insurance basics—as many possess a knowledge gap when it comes to what their home insurance actually covers—which potentially leaves them financially exposed.

Having the right amount of insurance can be the difference between a recoverable inconvenience and a life-changing disaster. I always recommend that couples regularly complete an insurance review to ensure they are familiar with their coverage.

For couples considering an insurance review, these few basic questions can provide a great starting point.

Q: Is your insurance policy based on the cost to rebuild or the market value of your home?

A: Cost to rebuild. While 30 percent of homeowners surveyed believe their insurance coverage is based on the current market value of their home, the available coverage limit for homeowners insurance is based on the cost to rebuild a home. This is a mistake that could lead to confusion for homeowners trying to evaluate whether they have the right amount of insurance to ensure their home can be repaired or rebuilt.

Q: Does your policy pay the full cost to replace a property after a major loss, such as a fire?

A: Maybe. More than two thirds (71 percent) of those surveyed believe insurance pays for the full cost to rebuild their property in the event of a major loss, such as a fire or other natural disaster. In reality, nearly all insurance companies "cap" the amount paid to rebuild the dwelling following a total loss, unless additional coverage is purchased. Furthermore, the coverage is subject to a deductible and certain causes of loss, such as water damage caused by the natural disaster of flooding, are excluded completely.

Q: Do you know how much your house, condo, or townhouse is insured for?

A: You ought to. Nearly one third (31 percent) of those asked don’t know how much their most valuable assets—their homes—are insured for. Check with your agent to make sure you have adequate coverage to rebuild your property after a loss.

Q: If your personal belongings are destroyed in a loss, will your policy pay the full cost to replace them?

A: Maybe. Almost three-quarters (73 percent) believe insurance will pay the full cost to replace personal belongings in the event of a loss. In fact, depreciation is usually factored in, unless optional replacement coverage is selected and the coverage, regardless of the chosen settlement method, is subject to a deductible. Additionally, 60 percent believe insurance will pay for the full cost of replacing valuables, such as jewelry and collectibles. Most insurance policies contain a payment cap for replacing valuables, although additional coverage can easily be purchased.

Q: Do you know how much insurance coverage you have for your home’s contents?

A: You ought to. Almost half (46 percent) of people don’t know how much coverage they have for their home's contents, such as furniture and clothing. Check with your agent to make sure you have adequate coverage for your personal property.

Joann Kraemer is a director of product development at MetLife Auto & Home. Kraemer has more than 20 years experience in the insurance industry. If you’re interested in testing your insurance knowledge based on the Insurance Literacy survey, please visit www.metlife.com/insurancequiz.


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