Despite efforts to get their financial houses in order during The Great Recession, many Americans possess a knowledge gap when it comes to what their home insurance actually covers, potentially leaving them financially exposed, according to a survey conducted by Zogby International for MetLife Auto & Home. The first of a two-part “Insurance Literacy” survey, testing consumer knowledge of insurance basics, focuses on homeowners, condo, and renter’s insurance, and reveals that, among other things, nearly one third (31 percent) of Americans don’t know how much their most valuable assets – their homes – are insured for. An additional 46 percent don’t know how much coverage they have for their homes’ contents, such as furniture and clothing. Additionally, many aren’t aware of coverage overlaps that may exist, which could result in opportunities to save money.

“At a time when many are working hard to save more and spend less, many Americans are leaving themselves open to costly surprises by not fully understanding the details of their policies and the scope of its coverage,” said Bill Moore, president of MetLife Auto & Home. “By knowing what they are – and are not – covered for, Americans can make sure they have the right amount of insurance coverage and avoid unwanted surprises.”

Common Misconceptions Lead to Costly Gaps

  • Thirty percent of homeowners believe their insurance coverage is based on the current market value of their home. Actually, the available coverage limit for homeowners insurance is based on the cost to rebuild the home, a mistake that could lead to confusion for homeowners trying to evaluate whether they have the right amount of insurance.
  • 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 disasters of flooding, are excluded completely.
  • 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.
  • Sixty 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, and the coverage is subject to a deductible.
  • For a major loss, nearly two-thirds (64 percent) of those surveyed expect their insurance to cover any building code mandated upgrades that are necessary. Without an endorsement/rider, most home insurance does not cover required upgrades located in an undamaged portion of the home.

“More than two-thirds of consumers surveyed also said they’d rather pay a higher premium than be told that a loss isn’t covered,” said Moore. “To ensure this doesn’t happen, consumers can find the best value by learning more about their policies and selecting the coverage that best meets their needs, rather  than simply shopping for the lowest premium.”

Unexpected Protection? Welcome Surprise!
On a positive note, with purse strings tight, opportunities exist for consumers to become more aware of what their current policies do cover in the event of a loss, to avoid insurance overlaps and unnecessary out-of-pocket expenses. For example:

  • Electronically downloaded and stored entertainment, such as music, ring tones, etc., can be expensive to replace without easy access to free re-downloads. However, more than 90 percent of homeowners didn’t know that insurance can extend coverage to electronic data.
  • Almost half (47 percent) didn’t realize there’s no need to secure additional coverage to insure the personal property of college-age children living on campus. This is covered under the standard homeowners contract, subject to its terms and conditions.
  • Finally, many homeowners would be surprised to learn that damage to appliances and wiring from a power surge would be covered by their insurance policy. More than half (59 percent) didn’t think it would – limiting out-of-pocket expenses to a deductible.

Forces of Nature Cloud Homeowners’ Peace of Mind
Many homeowners exhibit confusion about insurance coverage for natural disasters and unforeseen occurrences. Encouragingly, the majority of homeowners understand that flood damage is written on a separate policy from their standard insurance policies. However, many consumers are still misinformed – or unsure – about the coverage available for other types of events.

In some cases, homeowners are aware of the potential for a loss, but don’t realize what coverage they have against a particular hazard—a question easily resolved by reviewing their policies or talking to their agent. Among other things:

  • Although 83 percent believe foundation damage from earth movement is very serious or somewhat serious, only 37 percent know they aren’t covered for this under the standard homeowners policy.
  • More than a quarter (28 percent) incorrectly believe they’d be covered for an earthquake or volcanic eruption, and the same amount aren’t sure one way or the other. Most standard policies exclude this peril.
  • For water damage from a sewer or sump-pump back up, 67 percent of homeowners believe this would be covered. Without the appropriate rider, most policies don’t cover this.

Want to test your knowledge of homeowners insurance and compare your answers to those who were surveyed? MetLife Auto & Home invites consumers to visit

The Zogby/MetLife Auto & Home homeowners insurance survey sample consisted of interviews with 1,196 adults who have homeowners, condo, or renter’s insurance, and who are living in a household with a telephone. The interviewing was conducted May 26, to June 9, 2010.

Zogby International is a public opinion, research, and business solutions firm with experience working in 65 countries around the globe. Founded and led by John Zogby since 1984, Zogby International ranks as one of the industry's leaders thanks to its reputation for superior accuracy and reliability. Zogby specializes in telephone, Internet, and face-to-face survey research and analysis for political, corporate, non-profit, and governmental clients. The firm is headquartered in Utica, New York, with offices in Washington D.C. and Dubai, United Arab Emirates.

The companies operating under the MetLife Auto & Home brand, affiliates of MetLife, Inc. (NYSE: MET), are, collectively, one of the nation’s leading personal lines property and casualty insurance providers, with more than 2.7 million policies in force.  For more information about MetLife Auto & Home, visit MetLife’s Web site at


David Hammarstrom